Watch Job-Search Selling for Buys
This column was originally published on RealMoney on Nov. 18 at 12:44 p.m. EST. It's being republished as a bonus for TheStreet.com readers.
Investors love to see insider buying in the stocks of companies they own and abhor insider selling. But it turns out that selling in one group of stocks -- the job search and recruitment companies -- may actually serve in a perverse way as a positive signal, according to the results of new research from Thomson Financial.
The Thomson study uncovered an intriguing link between labor market trends and insider selling at job search companies like Robert Half International (RHI) and Administaff (ASF). Whenever selling at these kinds of companies hits extreme highs, overall U.S. job growth increases on average, over the next year or more.
The study, called "Insiders Foresee Changes in Unemployment Rate," found that when selling increases enough, unemployment falls over the next 12 to 24 months by anywhere from 3.2% to 5.7%.So what does insider selling in this group say now about future employment trends? Insiders are selling at near-extreme levels once again -- suggesting further strength ahead for both the job market and recruitment stocks, if history is a good guide. Robert Half International insiders, for example, dumped more than $41 million worth of stock since late July. At Administaff, insiders sold a hefty $13 million since the end of August. And at Kelly Services (KELYA), top execs sold more than $5 million worth of stock since the end of July. All of this selling, however, makes you wonder: Exactly why would insiders be dumping such large positions if future labor market trends are about to make their business even stronger? Thomson's Mark LoPresti, the author of the study, takes the unconventional view that strong labor markets are actually bad for job search companies. He reasons that tight labor markets make it easier for people to find work -- so they sidestep the job search companies.
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