Macro Insider Focus

First Call/Thomson Financial Insiders' Chronicle, July 30, 2001

For more than a year, characterizations of corporate insider sentiment have been decidedly bearish. Though ostensibly supported by aggregate SEC data and traditional sell/buy ratios, the invariable conclusion--that insider selling persists at near-record levels--is not altogether accurate.

In fact, while corporate insiders and other early investors continue to sell at levels in excess of historical norms, From 144 restricted stock sales (a usefull proxy for overall insider selling) peaked in February/March 2000 and have trended generally downward since.

The real disappointment, and the true driver of the much-lamented insider sell/buy ratios, is a persistent lack of significant insider buying. And this is no short-term phenomenon. An intriguing, though admittedly modest pick-up in Q4 1999 notwithstanding, aggregate insider buying has lagged historical mean levels for nearly three years.

As an exercise, we took a look at the sell/buy ratios within specific industries. The results were revealing. By this measure, very few industries stand out as bullish by historic comparisons. And the group is surprisingly diverse, with Advertising & Media, Containers & Packaging, Tobacco and Auto & Parts among the most compelling examples.

Insurance, Specialty Finance, Retail and Oil and Natural Gas are among the larger group of industries for which the ratio of sellers to buyers has escalated over the past two quarters. For Real Estate, Travel and Gas Utilities, these ratios have recently approached or surpassed ten-year highs.

Again, a good bit of this is attributable to the pervasive. lack of insider buying market wide. Moreover, each of these. groups fared fairly well in 2000. Nonetheless, that insiders have grown increasingly skittishness in these groups bears watching, even more so should the macro economy continue to flounder.

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