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Insider selling hits 2-year high
And the ratio of selling to buying jumps in what Thomson says could be bearish sign for stocks.
June 4, 2003: 7:16 PM EDT

NEW YORK (CNN/Money) - Stock sales by corporate officers hit a 24-month high in May, according to Thomson Financial, during a month when the U.S. stock market rose to its best level in nearly a year.

Insider selling jumped 150 percent to total $3.3 billion last month as executives in every sector but transportation sold stock, the Thomson figures released Wednesday show.

But Thomson said that while insider buying increased nearly 60 percent month-over-month to $119 million, it remains well below its 5-year historic average of $180 million.

In contrast, May was the first time since November that monthly insider sales exceeded the five-year historic monthly average of $2.4 billion.

The resulting rise in the sell/buy ratio could signal that the stock market's advance has run its course.

"The sharp spike in the level of the sell-buy ratio could be a troublesome sign for the market," according to Lon Gerber and Kevin Schwenger, two Thomson analysts who reported the data.

The selling comes during a stock market run that has propelled the Standard & Poor's 500 index up 12.1 percent this year. It also follows seasonal patterns because insiders who are restricted from selling during the April earnings reporting period often do so the next month.

Michael Dell, the CEO of Dell Computer, and Steve Ballmer, the CEO of Microsoft, have both sold shares of their companies this year, raising questions about whether the shares are fully valued.

But inside sales are not always a reliable market indicator. That's because the sales can motivated by the need to diversify among people whose net worth is often concentrated in one stock.

Still, Thomson's data show that the insider sell-buy ratio is the highest since May 2001, a period that pre-dated a big fall in the U.S. stock market.  Top of page




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