Financial sector insider buying at 12 year highs

Discussion in 'Wall St. News' started by makloda, Aug 27, 2007.

  1. Insiders' Buying by Banks Rises to Highest Since 1995

    By Daniel Hauck and Michael Patterson

    Aug. 27 (Bloomberg) -- Not since 1995 have so many chief executive officers of so many financial firms and their insiders bought so many shares in their companies as in August, when the market swooned.

    Stock purchases by executives at banks, consumer lenders and insurers in the Standard & Poor's 500 Index climbed this month to the highest in 12 years, data compiled by Bloomberg show. That's the strongest ``buy'' signal, according to analysts at Muzea Insider Consulting Services LLC and, which work for hedge funds tracking executive trading patterns.

    Wachovia Corp., American Express Co., CIT Group Inc. and American Capital Strategies Ltd.'s CEOs or directors added to their holdings as the rising cost of credit spurred by mortgage defaults sent the S&P 500 Financials Index to a 13-month low on Aug. 15. Insiders at companies in the index have bought $26.9 million of stock so far in August.

    ``That is a good sign that people closest to the business have confidence in it and invest in it,'' said Kevin Cronin, who oversees $187 billion as head of investments at Putnam Investments LLC in Boston. ``It's just indicative of how overly discounted the value of some of these financial stocks has become.''

    Putnam increased positions in banks and insurance companies over the past month as the shares declined.

    SEC Filings

    U.S. laws require company executives and directors to disclose stock purchases and sales within two business days in filings with the Securities and Exchange Commission, providing investors with clues about company prospects. Bloomberg compiled the monthly insider trading figures using data on open market purchases from the Washington Service, a research firm.

    The increase came as the S&P 500's biggest drop in four years wiped out $1.41 trillion in market value between July 19 and Aug. 15.

    ``You've got very negative sentiment, the public is frightened, a lot of hedge funds have sold out, and now there's insider buying,'' said George Muzea, founder and president of Reno, Nevada-based Muzea Insider Consulting. ``If you can't make money at this point in time, you can't make money.''

    Muzea charges as much as $500,000 a year for his service and wrote a book on insider buying and selling called ``The Vital Few Vs. the Trivial Many: Invest With the Insiders, Not the Masses.''

    Stanley Druckenmiller, the founder of Duquesne Capital Management LLC and a former chief strategist at George Soros's Soros Fund Management, is one of his clients.


    The seven days ended Aug. 14 had the ``most bullish insider sentiment we've ever seen in the financial space,'' said Ben Silverman, director of research at, which advises more than 350 institutional investors.

    The Princeton, New Jersey-based firm uses a scoring system that weighs the importance of insider trades according to criteria such as the seniority of officials, the size of a transaction and how much it affects total holdings. Individual buyers outnumbered sellers in the week ended Aug. 21 by 208, the most since began tracking the data in 2003.

    ``This is an extraordinary amount of activity,'' said Silverman. He cited Charlotte, North Carolina-based Wachovia, ``a name that historically does not see a lot of insider buying,'' and American Express as firms whose executive share purchases signal buying opportunities.

    Ernest S. Rady, a director at Wachovia, bought a combined 95,000 shares in the company for $4.42 million on Aug. 2 and 3. Wachovia, the fourth-largest U.S. bank, rebounded 10 percent since Aug. 3, after its shares had tumbled 15 percent in the previous three weeks.

    Rady declined to comment through Wachovia spokeswoman Christy Phillips-Brown. Wachovia's stock rose 25 cents to $49.82 as of 12:04 p.m. in New York.

    American Express

    American Express directors Jan Leschly and Robert Walter snapped up shares of the third-largest U.S. credit-card network this month. Leschly, who is also CEO of Princeton, New Jersey- based private equity fund Care Capital LLC, purchased 32,000 shares of American Express for $1.99 million on Aug. 8. He was traveling abroad and couldn't be reached for comment.

    Walter, the founder of Dublin, Ohio-based drug distributor Cardinal Health Inc., bought 30,000 shares for $1.87 million on Aug. 8. New York-based American Express lost 13 percent from July 19 through Aug. 15. Since then, the stock climbed 7.3 percent.

    Walter's assistant said he was traveling and couldn't be reached for comment. American Express's shares slipped 69 cents to $60.20 today.

    CIT, American Capital

    Insiders at other consumer-finance companies are also stepping in to buy. CIT Group CEO Jeffrey Peek purchased 14,300 shares Aug. 8, betting that the stock of the biggest independent U.S. commercial finance company would recover from an almost 40 percent loss. He added another 10,000 shares last week.

    Curt Ritter, a spokesman for New York-based CIT, said Peek's purchase ``reflects his confidence in the company and its employees and his belief that the stock is now undervalued.''

    CIT's stock fell 22 cents to $37.63 today.

    Peek's counterpart at American Capital Strategies, Malon Wilkus, also made multiple purchases this month after shares of his investment firm fell 21 percent from July 6 through Aug. 1. He bought 53,000 shares of the Bethesda, Maryland-based company on Aug. 2 and 13,850 on Aug. 16. American Capital's shares lost 12 cents to $40.70 today.

    `Great Time to Buy'

    ``It's a great time to buy American Capital,'' Wilkus said in an interview from Bethesda. ``The price is outstanding and the opportunities couldn't be better.''

    Conspicuous in their absence from lists of insider buying in August are executives at Wall Street's five biggest securities firms -- New York-based Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos.

    Officers at Goldman, the firm led by CEO Lloyd Blankfein that this month injected about $2 billion to help shore up one of its hedge funds, haven't bought shares in the company since January, according to data compiled by Bloomberg. Goldman's stock has dropped 23 percent from a record in June.

    Goldman spokesman Ed Canaday declined to comment.

    Bear Stearns executives including CEO James Cayne have refrained from buying since March, excluding a purchase of 2 shares by board member Frederic V. Salerno on July 27. Bear Stearns has tumbled 28 percent this year after wrong-way bets in bonds tied to residential mortgages forced two of its hedge funds into bankruptcy. The Amex Securities Broker/Dealer Index has dropped 6.1 percent this year.

    `Too Early'

    Bear Stearns spokesman Russell Sherman said the firm wouldn't comment on stock purchases by officers.

    ``It may be still too early to step back in,'' said Russ Koesterich, a San Francisco-based portfolio manager at Barclays Global Investors, which manages about $2 trillion. ``Until we start to see some evidence that there's no more toxic debt on those books, you probably want to be cautious.''

    Brian Barish, whose Cambiar Opportunity Fund has outperformed the S&P 500 for eight years, agrees that shares of some securities firms may continue to slide as market turmoil hurts earnings from trading and debt underwriting.

    ``It wouldn't be my first place to go bargain hunting right now,'' said Barish, who oversees $10 billion at Cambiar Investors LLC in Denver. He's buying insurance companies such as Northbrook, Illinois-based Allstate Corp. that have been dragged down by the slump in financial shares.

    Insider purchases at Allstate, the largest publicly traded U.S. home and auto insurer, totaled $535,698 this month.

    At Newark, New Jersey-based Prudential Financial Inc., the second-largest U.S. life insurer, Chief Financial Officer Richard Carbone bought 10,000 shares for $866,447 this month. Carbone declined to comment through a spokesman.

    `Good News'

    The last time insiders bought more shares of financial companies was in October 1995, when they purchased $37.2 million, Bloomberg data show. That was three months after the Federal Reserve cut its benchmark interest rate to 5.75 percent from a four-year high of 6 percent. The central bank lowered borrowing costs again in December 1995 and January 1996, helping to spur a six-year rally in financial shares.

    ``You only buy if you think you've got some good news in front of you,'' said Robert Doll, who oversees $1.2 trillion as chief investment officer of global equities at BlackRock Inc. in Plainsboro, New Jersey. ``The financial industry is saying, `My goodness, the prospects we have over the next period are a lot better than this devastation to our share prices, so let's go out and buy some.' That's a good sign for the financials.''
  2. john12


    26 million of stock and you print this? all these companies caps combined are in the trillions. i bet you in the past 2 years insiders sold 500 million of stock easy. 26 million is less than the annual compensation of at least the top 10 financial ceo's. for god sakes the ceo of gs made $60 mil last year. this is a bs fraud story
  3. john12, maybe the point they're trying to make in the article is that it's not the absolute dollar volume that surged but the relative amount of stocks bought compared to previous periods?

    Also, insider selling statistically has little predictive value as opposed to insider buying.
  4. Muzea charges as much as $500,000 a year for his service and wrote a book on insider buying and selling called ``The Vital Few Vs. the Trivial Many: Invest With the Insiders, Not the Masses.''

    Here's 500,000 worth of savings. If the insiders are selling don't follow them, doesn't seem to work on short side.

    Secondly, It would be great if you could invest at discounted option prices with the insiders. Reality doesn't work that way.

    I'll second your second comment on your second post makloda.

    Sarcasm aside, that is more good evidence on the bull side. Just seems funny when they say follow the insiders. Would make sense if they said, insider buying at market prices is such an anomaly that someone must know something to be buying at the price of the masses. Because everyone already knows, insiders only "SELL" at market prices :D
  5. This shit is still going to hurt the financials in my opinion.

    And this snippet-

    "While July existing home sales came in in line with expectations, the pace is still weak and the increase in inventory (to 9.6 months supply at the current sales pace) is especially unwelcome. This occurred before the recent credit crunch, so the concern is that difficulties in the mortgage market may further impact sales in August. "
  6. and this as well-

    July Housing Numbers: I Say Just Plain 'Bupkiss'
    Posted By:Diana Olick
    Topics:Interest Rates | Housing | Real Estate
    Sectors:Financial Services | Construction and Materials
    Companies:American Home Mortgage Investment Corp | Capital One Financial | Countrywide Financial Corp
    American Home Mortgage

    I said the word bupkiss on TV this morning. Is that kosher? I just couldn’t think of a better word, for all my years of hifalutin network journalism experience. It’s just that everyone wanted to talk about the July existing home sales numbers, how sales were essentially flat, and that was better than many folks had predicted, and yadda yadda, isn’t that nice? But the fact of the matter is, the real credit crisis didn’t hit until after all those contracts that make up the July numbers were signed, sealed and delivered.

    Remember the folks packing up their desks at American Home Mortgage AHM
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    [AHM Loading... (%) ] ? Remember Countrywide CFC
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    [CFC Loading... (%) ] taking out an 11 billion dollar loan? Remember any number of lenders from Countrywide to Capital One COF
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    [COF Loading... (%) ] that they were shutting down their Alt-A mortgage units, in addition to curtailing subprime? August. It was all August. So when I see the number of closings, i.e. sales, for August, September, really October, which will be based on homes people shook on in August, then I’ll have something to talk about.

    The one thing I will take from today’s numbers from the National Association of Realtors is the inventory number, because that’s only going to rise, thanks to increasing foreclosures, and, dare I say, wow, it’s pretty high right now. A 9.6-month supply. We haven’t seen that since Sept. 1990, and that was when the nation lost about a million jobs. We have job growth today, but nobody’s buying houses with all that newfound, newly earned cash.

    A study from Credit Suisse shows the adjustment date for all those dicey ARMs that were sold during the peak of all that aggressive boom lending is October and beyond, so we haven’t seen the worst of the defaults and resulting foreclosures. If I’m right, and who knows if I am, those foreclosed homes will only push the inventory numbers up even higher. Yes, everything’s local, and yes, some markets will be hit harder than others, but yes, it’s all telling me that when I look at a bunch of numbers from July, they don’t really mean bupkiss.
  7. Bupkiss.
    Subprime and jumbo are both small parts of the mortgage market, which itself is only one part of the debt market, which takes in the rest of the consumer debt market, like credit cards and car loans. Then there's corporate debt, and government debt.
    No large Wall Street investment bank is about to go belly up.
    No large money-center bank is remotely threatened.
    But they have all traded sharply lower on this stuff.
    So I think it will repay you to pay attention to all that insider buying.
  8. Toro KMA

    Toro KMA

    Last time I checked, there were 70-75 banks in the Russell 3000 trading at 1.25x tangible book value or less.

    At some point, I'm going to back up the truck. I'm not sure about the timing though.
  9. read this then.
  10. Daal


    insiders also load up on AHM and Thomburg just before they nosedived
    #10     Aug 28, 2007