WINDERMERE, Florida (Stockpickr) -- Corporate insiders continue to be large net sellers of stock during the most recent reporting period for S&P 500 companies, according to Bloomberg.com. For the week ending Oct. 8, insiders at S&P 500 companies dumped around 1,169 shares for every one share they purchased. This is a bit of an improvement from the previous week, which saw insiders were selling 2,341 shares for every share they bought.
Despite the marginal improvement, the current buy/sell ratio is still an early warning sign for anyone who's long the stock market at present levels. Clearly, corporate insiders aren't interested in buying shares of the companies they run. They seem to be much more interested in selling stock into a rising market that has been going up on light volume.
If you're a bull on the markets, it's probably a little disturbing to see the lack of insider buying. However, the overall market can continue to move higher despite the fact that insiders aren't finding value in their own stock. The question is: How long can the market trade higher?
Right now it looks like all the major U.S. market indices are well on their way to testing 2010 highs. This seems to be the path of least resistance for market players. After those highs are tested, things could change, but for now we have to give the current uptrend the benefit of the doubt.
So why are corporate insiders selling so much stock, if the path of least resistance in the markets is higher?
I would view the lack of
and their propensity to sell as a longer-term view that stocks aren't a great value to those who know the most about their companies. Let's face the facts: With a second round of quantitative easing (QE2) around the corner, corporate insiders at S&P 500 companies are selling their shares into strength. You really can't blame them for taking advantage of the higher prices and booking profits.
Here's a portfolio of the
. We'll take a look at four of them here.
Last week, I highlighted how insiders at
. For the most recent reporting period, the insiders at both of these companies have not let up on that selling.
Insiders at Google sold 5.9 million shares, or $163 million worth of stock, at an average price of $532.83. Insiders at AutoZone dumped 45,279 shares $10.5 million worth of stock at an average price of $232.48.
Google is set to report earnings this week, so it's possible that insiders are letting go of stock ahead of the report to avoid any possible volatility in the shares. That doesn't mean the stock is going to trade down on earnings -- it just means that these insiders might find it attractive to sell the stock into its recent strength. Shares of Google are up 21% since Sept. 1.
Last week, I also highlighted how insiders at
were selling a large amount of stock. The smart money hasn't let up at Salesforce.com, either. Insiders let go of 58,000 shares, or $6.2 million worth of stock, at an average price of $108.21. Despite the heavy beating this stock has taken in the last couple of weeks, insiders continue to dump shares at a feverish pace.
I will note that Salesforce.com has rebounded some from its recent low of $100 a share, but again, insiders aren't buying into that rebound --they're selling.
The largest amount of insider selling for Oct. 8 reporting period came out of
. Insiders at this tech giant dumped 5.9 million shares, or $163 million worth of stock, at an average price of $27.42. Some of the key insiders who sold were the executive vice president of operations and the most important insider of them all, CEO Larry Ellison. It seems like Ellison is always selling stock in Oracle, so I wouldn't read too much into his trading activity.
As I write this, Oracle is breaking out to a new
, so Ellison is leaving some of those millions on the table. I am sure he won't lose any sleep, though, since he's already a multi-billionaire.
The third-largest amount of insiders selling during the most recent reporting period occurred in
, a worldwide operator and franchisor of hotels and related lodging facilities. Insiders at Marriott sold 329,000 shares, or $12 million worth of stock, at an average price of $37.10 a share. Some of the key insiders who sold at Marriott include the president and COO and the vice chairman.
With the stock just two points off its 52-week high, you've to wonder if the best days are behind it. Of course, that's until the QE2 effect is no longer in place in the markets and the Bernanke put is removed.
The fifth-largest amount of selling showed up in
, an integrated communications company engaged in providing a range of communications services, including local and long distance voice, wholesale local network access, high-speed Internet access, other data services and video services.
Insiders at CenturyLink sold 152,000 shares, or $6.1 million worth of shares, at an average price of $40 a share. Key insiders that sold at CenturyLink include the executive vice president and COO and the CEO. Shares of the company are trading close to the stock's 52-week, so again, you have a situation where corporate insiders are selling into strength.
What I found most interesting about this recent insider selling report is that some decent selling was showing up in some defensive stocks that are normally good plays for a slowing economy. For example, insiders at
dumped 64,000 shares, or $3.8 million worth of stock, at an average price of $59.65. Also, insiders at
sold 70,000 shares, or $2.5 million worth of stock, at an average price of $37.14.
One final defensive name that insiders were selling stock at was
, a provider of medicines, pharmaceutical supplies, information and care management products and services across the healthcare industry. Insiders at McKesson sold 84,000 shares, or $5.1 million worth of stock, at an average price of $60.86.
Maybe the executives at these three defensive plays are thinking that QE2 could last for a while and their stocks aren't going to be great plays during this cycle. Only time will tell if that is how the current cycle plays out.
To see more stocks with heavy insider selling, check out the
portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.
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At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.