Pro Analysis

One really important group is not buying during the Trump rally: Corporate insiders

Wall Street, NYSE after hours
Mario Tama | Getty Images

There is one major, well-informed group of individuals out there who are not buying the rally in stocks after the election: corporate executives.

In fact, not only are insiders not buying, they are selling big time in the wake of the election, according to Vickers Weekly Insider, which tracks insider buying and selling to make investment decisions.

"Overall insider sentiment remains bearish — and very uniformly so, as all of the major sell-buy readings from Vickers are logging the exact same numerical results this week," the publication said Tuesday.

In the last week, there have been more than four insider sale transactions for every one purchase of NYSE stocks, according to Vickers.

Its eight-week sell-buy ratio, a less volatile reading, is 3.38-to-1, a change from near 2.5-to-1 just before the election as insider selling intensified after Trump's victory. See on the chart below (insider ratio is inverted on right scale) how the Dow Jones industrial average jumped as this ratio deteriorated (insider selling increased).


Source: Vickers Stock Research

There is typically more insider selling than buying so Vickers tracks a ratio over time in order to use it as an accurate sentiment indicator. If there are fewer than 2 sales for every 1 buy, then Vickers considers that bullish (marked with dotted line on the chart above). If there is more than 2.5 sales for every buy, then it suggests a "weakening market" may be ahead, according to the publication.

Investors have been falling over themselves to buy stocks since the election on the notion that Trump is the savior for an overregulated, overtaxed corporate America. So it's curious that the leaders of corporate America aren't putting their money behind this view as well. Maybe they are taking things like Trump's tough Carrier negotiation and his comments Tuesday about Boeing's supposedly costly Air Force One work to mean the president-elect will be tougher on business and more protectionist than the market current believes.

Vickers also provides clients with a list of stocks seeing the biggest insider selling.

The 10 stocks seeing the most active insider selling are below. Holders of these names may want to take a second look at their investment and ask themselves why insiders are bailing in force right now. Some of it is for life-planning purposes by executives, but when there is a cluster of selling, it is often reason for caution.