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The market takes an upward turn, and the insiders head for the exits.
In the wake of the largest stock market rally in 71 years, according to Bloomberg, the sale of insider shares has reached its most aggressive levels in the past two years. Insiders of companies in the S&P 500 were net sellers for 14 weeks in a row. Six people at Amgen (NASDAQ: AMGN), for example, sold $8.2 million in company stock.
If they're using the bounce to unload what worries them, look for another plunge. Executives who don't have confidence in their own companies are certainly in a position to tip an upward climb into a downward spiral.
But, there's more to this than the cynic's view.
Twelve months of history show us that keeping a hefty stake in the firm you run can leave you with empty pockets. For insiders, selling out can be nothing more than a diversification play. There's no shortage of examples, right now, of executives who have been stung by not shrinking the positions they have in the companies they run.
The timing seems fishy for an effort to diversify. It seems awfully convenient that insiders would choose to rebalance their portfolios during a market surge ... and then, you realize that it is convenient. Because, who the hell would dump sizable holdings at the bottom?!
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