Insider Ratio Drops to 2022 Low in October

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As the market has faced recent economic headwinds due to persistent inflation, the ratio of companies with insider buying to companies with insider selling fell to a 2022 low of 0.36 in October. Last month, 212 companies were purchased by insiders, and 597 companies were sold. The October ratio comes in just under the ratio of 0.38 for January 2022, and is the lowest that the metric has been since October 2021 (see graph below).

While October is usually a slower month for insider transactions due to earnings announcement-related trading prohibitions, it is worth noting that the 212 companies purchased last month is the lowest of any month this year, and the fewest companies purchased in any month since January 2021. This drop-off in aggregate insider purchasing comes after the market has struggled for most of this year and could represent a wait-and-see approach by insiders amidst a cloudy economic picture. As shown on the graph above, the aggregate insider ratio usually dips when the market rises, and spikes near a low point for the market before a potential rebound. Given the ratio's year-to-date low, it seems that insiders as a whole are hesitant to bet on the market's recovery in the near-term.

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The Washington Service Research Team