There is always a blackout period before earnings when insiders are forbidden to buy or sell their own stock. Usually this is a 45 day period before earnings and 24-48 hours afterwards. The idea is that by the end of the quarter insiders have a good idea of what their companies are going to earn and to avoid trading on this knowledge most companies impose a black-out period in which insiders are forbidden to trade the companies’ stock. The exact days and trading windows differ slightly from company to company as they are based on an interpretation of SEC rules.
The last two weeks have been bleak, unusually devoid of any insider buying. Yes, there is always a dearth of insider buying before the of the quarter but this is abnormally quiet. The attached data is from the Washington Service, my preferred vendor of such information. I only screen for significant buys, $100,000 or more, and those made by officers and directors of the company. I tend to disregard 10% owners, institutional, and hedge fund type investors as I view these purchases less meaningful than those of officers and directors. I like to think that people who actually work at the company or attend the board meetings might be better investors than those slinging large buckets of money belonging to others.
There are only 23 insider buys over $100,000. And of those 23 names, 14 of them are involved in secondaries or IPO’s which I ignore as it is too akin to window dressing to be that meaningful. For example a company goes public and sells $millions of dollars worth of its stock so the CEO buys a little to make others feel good about buying shares the VC’s or founder are unloading. The remainder is either penny stocks or complex transactions that signify nothing other than a lot of research for uncertain gain. That leaves Kingold Jewelry, a Chinese stock. Anyone feel good about buying into a small cap Chinese company?
So you rightfully counter that this is the prime blackout period and insiders can’t purchase. That may be true but dozens of these very same insiders have found loopholes, 10b5-1 plans, planned exercises and the like to unload hundreds of millions of dollars during this very same blackout period. So where are the insiders? There not putting in buy orders, that’s for sure. Perhaps they are all at Sun Valley, Idaho basking in their riches from all the stock they have sold.
This lack of buying is telling. Caution is the word of the day.