NEW YORK/LONDON: August Busch III, an AT&T board member since 1980, bought $2.27 million of shares in the biggest US phone company last month, his largest purchase on record. Monsanto director William Parfet added to his holdings in the world’s no. 1 seed producer for the first time in eight years.
Chief executive officers, directors and other senior officials in corporate America are buying more of their companies’ shares than they’re selling for the first time since 1995, prompting growing confidence the stock market is poised to rally for the rest of the year.
The last seven times insiders bought more than they sold, between 1988 and 1995, the Standard & Poor’s 500 Index rallied an average 21% in the following 12 months, according to data compiled by the Washington Service. The purchases show executives believe the worst may be over after stocks suffered the biggest January drop in 18 years on signs the economy is in a recession.
“If it’s so bad, how come these guys are gobbling up their own companies’ stock? That’s the telltale indicator,” said Fritz Meyer, 57, the Denver-based senior market strategist at AIM Advisors, which manages about $166 billion. “Companies are in the best possible position to assess the economic outlook.”
Purchases by officers, directors and other senior managers of the 1,911 companies on the New York Stock Exchange reached $683 million in January, Securities and Exchange Commission filings compiled by the Washington Service, a Bethesda, Maryland-based research firm that tracks insider data for more than 500 mostly institutional clients, showed.
Perfect Record
Total purchases were 1.44 times more than sales, the first time in 13 years that insiders became net buyers, the data show. The S&P 500, the benchmark for American equities, hasn’t fallen in the 12 months after insiders bought more than they sold, according to Washington Service data that go back 20 years. Executives and directors may be underestimating the effect of the US economic slowdown on earnings, said Robin Hepworth, 44, at Allchurches Investment Management Services.
Fourth-quarter profits dropped an average 25% for the 289 members of the S&P 500 that have reported so far, data compiled by Bloomberg show. The economy expanded at a 0.6% annual rate in the quarter, half the pace of economists' forecasts, as home construction plunged the most in 26 years and banks including Citigroup and Merrill Lynch wrote off mortgage-related losses.
Chief executive officers, directors and other senior officials in corporate America are buying more of their companies’ shares than they’re selling for the first time since 1995, prompting growing confidence the stock market is poised to rally for the rest of the year.
The last seven times insiders bought more than they sold, between 1988 and 1995, the Standard & Poor’s 500 Index rallied an average 21% in the following 12 months, according to data compiled by the Washington Service. The purchases show executives believe the worst may be over after stocks suffered the biggest January drop in 18 years on signs the economy is in a recession.
“If it’s so bad, how come these guys are gobbling up their own companies’ stock? That’s the telltale indicator,” said Fritz Meyer, 57, the Denver-based senior market strategist at AIM Advisors, which manages about $166 billion. “Companies are in the best possible position to assess the economic outlook.”
Purchases by officers, directors and other senior managers of the 1,911 companies on the New York Stock Exchange reached $683 million in January, Securities and Exchange Commission filings compiled by the Washington Service, a Bethesda, Maryland-based research firm that tracks insider data for more than 500 mostly institutional clients, showed.
Perfect Record
Total purchases were 1.44 times more than sales, the first time in 13 years that insiders became net buyers, the data show. The S&P 500, the benchmark for American equities, hasn’t fallen in the 12 months after insiders bought more than they sold, according to Washington Service data that go back 20 years. Executives and directors may be underestimating the effect of the US economic slowdown on earnings, said Robin Hepworth, 44, at Allchurches Investment Management Services.
Fourth-quarter profits dropped an average 25% for the 289 members of the S&P 500 that have reported so far, data compiled by Bloomberg show. The economy expanded at a 0.6% annual rate in the quarter, half the pace of economists' forecasts, as home construction plunged the most in 26 years and banks including Citigroup and Merrill Lynch wrote off mortgage-related losses.
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