Insider Trading Buy/Sell Ratios Rise as Insiders Swing Towards Purchasing

Mike Stein - Senior Research Associate

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Earlier this year, as the market was concerned with the progress of the ongoing economic recovery and various volatile "meme stocks", the ratio of insider buying to insider selling fell to an all-time low in January (see Feb. 3 article).  Insider sentiment seems to have reversed in the intervening months, however.

As shown on the graph below, the ratio of companies with buying activity compared to ones with selling activity over the past 30 days rose to 0.48 (551 comps bought to 1,152 comps sold), the first time this year that the ratio has crossed the seven-year period average of 0.47. Similarly, the ratio of individual insiders rose to a year-to-date high of 0.40 (958 insiders buying to 2,383 insiders selling) over the past 30 days. The 958 individuals with buying activity over the past 30 days also represents the highest count of insiders purchasing since August 2020.

The shift among insiders towards buying could represent optimism that the post-Covid recovery will continue. While the major indices have surged this year, the purchasing activity by insiders could also represent dip-buying behavior in stocks that have recent given back some of their gains. Regardless of individual intent, the chart makes it clear that on the whole insider behavior has shifted away from selling and towards buying over the course of 2021.

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The Washington Service Research Team