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What the Insider Crowd's Buying

I am actually overweighted energy myself. There's a saying that it's better to light a candle than curse the darkness. Seems to me that it's also better to own some energy stocks than to complain about high prices at the pump.

Yielding to Insiders

The most pronounced trend in recent insider buying, however, crosses industry lines and probably will surprise quite a few investors. Nearly a quarter of the 107 companies that made it through my initial screens for significant buying over the past three weeks have an indicated yield of 3.2% or more!

Considering that concern about rising interest rates is viewed as a major cause of the recent selloff, it seems counterintuitive for executives to be so obviously leaning toward higher-yielding securities. After all, these stocks will be hurt if higher-yielding bonds start to compete for the attention of income investors. Yet the trend is very clear.

Now, I am not ready to read into this trend that some group of yield-purchasing execs "knows" that the Fed will pause in its raising regimen when it next meets. I don't even believe the Fed governors know what specific economic data they will be dealing with weeks from now when it comes time to make their decision.

But I am ready to read into the buying that the yields of the securities purchased are almost certainly sustainable. And considering the very high yields of some of these securities, they do look pretty attractive right here and now.

Mortgage Mania

The sector most heavily represented in the high-yielding group may also surprise you: mortgage REITs. If the sky hovering over the real-estate market is indeed about to fall, Chicken Little forgot to visit the executive suites at these firms. Of course, the stocks in this sector already took a huge hit late last year when a flat and inverting yield curve ruined the carry trade that many of these REITs depended on to make money in their investment portfolios. Perhaps what insiders are signaling now is simply that the worst is over.
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