Executives at United States companies are taking advantage of the biggest stock market rally in 71 years to sell shares at the fastest pace since credit markets started to seize up two years ago.
Insiders of Standard & Poor's 500 Index companies were net sellers for 14 straight weeks as
the gauge rose 36 per cent, figures compiled by InsiderScore.com show.
Amgen chairman and chief executive Kevin Sharer and five other officials sold US$8.2 million ($13 million) of stock.
Sales by chief executives, directors and senior officers have accelerated to the highest level since June 2007, two months before credit markets froze, as the S&P 500 rebounded from its 12-year low in March.
The increase is making investors skittish because executives presumably have the best information about their companies' prospects.
"If insiders are selling into the rally, that shows they don't expect their business to be able to support current stock price levels," said Joseph Keating, the chief investment officer of Raleigh, North Carolina-based RBC Bank, the unit of Royal Bank of Canada that oversees US$33 billion in client assets.
"They're taking advantage of this bounce and selling into it."
The S&P 500 slid 2.6 per cent to 921.23 last week, the first weekly decline since May 15, as investors speculated the three-month jump in share prices already reflected a recovery in the economy and profits. Stocks dropped as the Federal Reserve reported that industrial production fell in May and S&P cut credit ratings on 18 US banks, saying lenders will face "less favourable" conditions.
The S&P 500 slid the most in two months yesterday, losing 3.1 per cent, after the Washington-based World Bank said the global recession this year will be deeper than it predicted in March. New Zealand's NZX-50 closed down down 1.18 per cent.
Insiders increased their disposals as S&P 500 companies traded at 15.5 times profit on June 2, the highest multiple to earnings in eight months, Bloomberg data shows. Equities climbed as the US government and the Fed pledged US$12.8 trillion to rescue financial markets during the first global recession since World War II.
Executives at 252 companies in the S&P 500 unloaded shares since March 10, with total net sales reaching US$1.2 billion, according InsiderScore. Companies with net sellers outnumbered those with buyers by almost 9-to-1 last week, versus a ratio of about 1-to-1 in the first week of the rally.
"They're looking to take some money off the table because they think the rally will come to an end," said Ben Silverman, the Seattle-based research director at InsiderScore.com. "It's the most bearish we've seen insiders in two years."
The last time there were more US corporations with executives reducing their holdings than adding to them was during the week ended June 19, 2007, the figures show. The next month, two Bear Stearns hedge funds filed for bankruptcy protection as securities linked to sub-prime mortgages fell apart.
- BLOOMBERG
Executives at United States companies are taking advantage of the biggest stock market rally in 71 years to sell shares at the fastest pace since credit markets started to seize up two years ago.
Insiders of Standard & Poor's 500 Index companies were net sellers for 14 straight weeks as
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