Nejat Seyhun’s Take on the Flood of Insider Sales
It should be pointed out that insiders have been heavy sellers of stocks for quite some time. Insiders are almost always early, both in their buying and selling. This is no surprise, as by the very nature of the situation, they have an informational advantage and are bound by legal constraints, which expresses itself inter alia as an often considerable lead time in their activities. If one tries to time one’s investments by relying solely on insider data, one will often find one’s patience taxed, since what is needed for the investment to produce a positive return is usually that othermarket participants begin to recognize what the insiders have known all along.
So what is the current situation? As noted at the beginning, insider selling hasn’t just picked up recently – it has been quite heavy for a long time now. What makes the current situation remarkable is only that insiders haven’t expressed this much skepticism about valuations for some 25 years, as Mark Hulbert reports. He has some interesting information on how the data on insider activity need to be parsed to arrive at actionable intelligence:
