Insider buying falls sharply in January

Despite a sharp drop in the markets, bearish insiders cut their stock buying in January to the lowest level since 1995, according to a new report.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read
Despite a sharp drop in the markets, bearish insiders cut their stock buying in January to the lowest level seen since 1995, according to a report released Wednesday by InsiderScores.com.

Buying by insiders, which include company directors and officers, fell to $125.4 million in January, down 51 percent from a year ago and 60 percent from December. The only time it was lower was in September 1995, when it was $115 million.

"With the market level being where it's at today, I would expect a much greater level of buying," said Lon Gerber, research director for InsiderScores, a Scottsdale, Ariz.-based research firm that tracks insider buying and selling.

Insider activity can be interpreted as a short-term indicator of a stock's value. For example, if insiders sell at a low price it can be perceived by investors and employees as a lack of faith in the prospects of the share price.

Insider sales reached $3.5 billion during January, up 9 percent from December. The increase in sales was partly driven by insiders wanting to defer paying capital gains for 2000, choosing to take any gains in the 2001 tax year, Gerber said. Insider sales last January were nearly 18 percent higher than they were this year.

There is usually a lull in January buying, Gerber noted, because of restrictions against buying and selling before quarterly financial information is released.

Insider buying "We saw a lot of buying in smaller telecom companies, like digital equipment makers and local exchange carriers, at the end of the year, but January has been slim pickings," said Paul Elliott, an insider analyst with Thomson Financial.

Elliot said the slowdown might be tied to the fact that the tech industry generally has fewer insiders buying shares on the open market compared with other industries.

"Tech insiders often have large option grants, so that may be why we're not seeing a lot of buying," Elliot said.

The buying--and selling--is expected to pick up in February, since the window that prohibits transactions is usually lifted after a company reports its quarterly results, Gerber said.