Counter-trend operations! US stock executives' "bottom-fishing" speed hits a new high since May, releasing bullish signals
Insiders of listed companies are accelerating the purchase of their own stocks, a move that comes against the backdrop of concerns over the AI bubble leading to capital withdrawal from technology stocks and a market shift towards defensive sectors. As NVIDIA's strong earnings report alleviates market worries and drives a rebound in stock indices, insiders' "bottom-fishing" actions demonstrate foresight. Analysts point out that the motivation behind insider purchases is purely driven by a strong signal of stock price undervaluation
Recently, as the U.S. stock market has experienced its most significant correction since April, insiders of listed companies are actively increasing their holdings in their own stocks.
According to media reports, the pace at which executives have bought their own company's stock in the past 30 days has reached a new high since May. Statistics from Washington Service Company show that the ratio of insider buying to selling has risen to 0.5.
This wave of buying comes against a backdrop of heightened concerns about the AI bubble, as investors shift from overvalued tech stocks to defensive sectors. The S&P 500 index fell 3.1% in a single week, nearing its worst performance in four months. While other buyers are cautious, corporate executives are choosing to "buy the dip."
With NVIDIA announcing strong revenue expectations on Thursday, market concerns about the AI bubble have eased, leading tech stocks to lead a collective rebound in the three major indices. The previous low-level purchases by insiders appear quite prescient.
Insiders Accelerate "Buying the Dip," Sending Bullish Signals
Jay Hatfield, CEO and Chief Investment Officer of Infrastructure Capital Advisors, commented on the accelerated "buying the dip" behavior of company insiders:
"They are putting their money where they see potential. They are not day traders but long-term investors taking advantage of the pullback."
Meanwhile, traders generally agree with the confidence of corporate executives. JP Morgan stated that the decline in the S&P 500 index is a "technical washout," providing an opportunity for investors to increase their stock positions.
Brian Jacobsen, Chief Economic Strategist at Annex Wealth Management, stated:
“Insiders are in a fairly advantageous position when assessing the company's prospects. Insiders may be optimistic about the company, but net insider buying could be a bullish signal.”
Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, noted that while insiders know their companies well, they "may not necessarily understand the stock market very well," so from a market timing perspective, one cannot fully rely on insider buying behavior. However, he stated that net buying volume is a positive market sentiment indicator. He said:
“There are many reasons insiders sell stock, whether to diversify risk, pay taxes, or meet cash flow needs, but there is only one reason insiders buy their own stock: they genuinely believe the stock is undervalued.”
