When participating in the stock market, investors often need to explore areas where others are not looking in order to maximize their potential for making substantial returns. Monitoring the transactions company executives are making should be an important aspect of analyzing a firm or the pulse of the stock market.
With 2022 being a lousy year for stocks, the bottom should be in once corporate executives start piling into their firm’s shares. It seems such a moment is upon the markets, at least according to the head of Global Macro at Fidelity, Jurrien Timmer.
Namely, Timmer took to Twitter on October 12 to share an interesting graph depicting the buying action of corporate management and the opportune times they came in at labeling the insider buying “a glass-half-full sign.”
“Look who’s bullish: Corporate insiders are buying their company stock again in size during this latest sell-off. As the saying goes, insiders sell for all kinds of reasons, but they only buy for one. Given the historical accuracy of their timing, it’s a glass-half-full sign.”
Investing for the future
It seems that sectors like information technology, industrials, financials, real estate, communication services, and consumer discretionary are seeing more significant insider activity, according to recent reports that analyzed S-4 fillings of various large-cap companies.
As the sectors mentioned above are susceptible to inflation and interest rates; therefore, insiders buying up shares in such sectors could be a positive sign.
The Federal Reserve’s (Fed) forward guidance indicates that the rate hikes will target 4.75% until mid-2023, after which they will taper off, as this level should be sufficient to control inflation and bring back the economy.
If this is the case, and large insiders are piling in, further observation of the trend could indicate the best time to jump in. Right now, some near-term volatility is expected, especially as new inflation numbers are expected later today (October 13).
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.