Insider Selling Hit Six-Year Highs As Retail Investors Rushed Into Stocks
April 4th, 2017 by Jason B. Vanclef
by Tyler Durden
Earlier we showed that when looking at asset returns in the first quarter, there were hardly any underperformers while positive returns were generous across virtuall all asset classes. What drove this outsized performance, which once again left most hedge funds and asset managers seeking to generate alpha in the dust? The answer: a continuation of the capital reallocation euphoria launched with the Trump election in November, which continued for the second consecutive quarter. And while stocks were by far the biggest beneficiaries of the fund flows, with US equity ETFs alone taking in $62 billion in Q1, as TrimTabs’ David Santschi points out, the bond inflow was perhaps the most noteworthy, which saw $34 billion in inflows even as Bond ETFs rose just 1.0% last quarter, yet money kept pouring in all quarter.
Here is the summary of how retail investors allocated funds to the market, courtesy of the TrimTabs:
Yet while retail investors, whether due to latent “Trumpforia”, or other reasons, were allocating cash to risk assets, others were selling, most notably corporate insiders, who according to TrumTabs unloaded $10 billion ($500 million) in stock in the first quarter, the highest volume since February 2011, even as corporate buybacks continued to decline to the lowest level since November 2013. Some more details:
U.S. companies have been committing less money to shrink the float ever since the election. In March through Thursday, March 30, announced corporate buying (new cash takeovers + new stock buybacks) of $44.5 billion was only 1.5 times the $29.5 billion in new offerings. This buy/sell ratio is the lowest since November 2013. Since the start of November 2016, the buy/sell ratio has been 2.7-to-1, below the average of 4.3-to-1 in all of 2016.
As companies have been less willing to use cash to support share prices, corporate insiders have been selling at the fastest pace in six years. Insiders unloaded $9.9 billion ($500 million daily) in February and $9.7 billion ($450 million daily) in March, the highest monthly volumes since February 2011.
Do buying mom and pop investors know something selling corporate insiders do not? Normally, some would smile at this assumption, alas in this day and age when retail investors are increasingly becoming the “smartest” money (with hedge funds almost terminally relegated to “dumb money” status), this time may just be different. For the definitive answer check back this time next quarter.