Share Buying by Insiders Declines by 50% in July

Buying of shares by executives in their own companies has dropped to the lowest level since August 1993, according to Lancer Analytics.

Insider buying, measured by the dollar value of shares bought, declined to $77.9 million in July, or 50%, from $154.7 million in June.

The drop continued the declining trend in share purchases by corporate executives, said Lon Gerber, director of research at Lancer. For the first half of the year, monthly volume of insider purchasing has ranged from $150 million to $180 million, consistently below its five-year monthly average of $322.1 million, he said.

“It’s a clear indication that executives are seeing the world in the same way as the general public,” said Scotty George, chief investment strategist at Corinthian Partners Asset Management. Both “insiders and the public see the economy in for a protracted period of rest.”

Investors view the level of buying by insiders--top officers and directors who have the best access to information on their companies’ prospects--as an indicator of market sentiment. Insiders presumably buy shares when they think they’re a bargain relative to their companies’ business prospects, and a lack of insider buying can be seen as a bearish sign for the stock market.

Insider selling, in terms of the value of shares sold, in July totaled $2.2 billion, the lowest monthly sales volume since October 1998. It also was below the five-year monthly average of $3.5 billion.

Investors looking for tips from corporate executives buying their own stocks may want to look at the energy sector, Gerber said, adding that energy insiders historically make well-timed purchases.

Rowan Cos. (ticker symbol: RDC), Baker Hughes Inc. (BHI), Chiles Offshore Inc. (COD), Apache Corp. (APA) and Burlington Resources Inc. (BR) were all targets of insider buying in the last month.

Investors may want to avoid technology and financial stocks, to which insider sentiment has turned increasingly bearish, Gerber said. Buying of tech shares dropped to $2.5 million in July, down 90% from the $42.6 million bought by insiders in June.