Another red month in insider trading, what can we learn?
There was only one day in August so far where across all Form4s
insiders bought more than they sold. On August 4, Warren Buffett and
Jeffrey Ubben greatly increased their stakes in Occidental Petroleum
and Exxon Mobile respectively. Otherwise, its a whole lotta red.
Is insider sentiment always negative? Pretty
much. Over the past five years the only time insider buying outpaced
selling was in March and April 2020 following the COVID-19 market
Does this mean insider's always expect a crash?
Probably not. There are a couple big reasons insiders sell more than
they buy. In the case of mature companies, many insiders have owned
shares since founding and have therefore seen incredible returns
meaning the only thing left for them to do is realize gains by selling. The
richest men in the world are minted in this way. This appears as
negative sentiment as less money went in than came out but, in truth
it just indicates compounding returns. Another factor is generous
executive packages that grant insider's endless options which won't
appear as buying but, certainly appears as selling.