Insider Buying

What a depressing day, or week for that matter, but according to a particular indicator things will get better.

The insider sales-to-purchases ratio was 13 in November. In other words, for every $13 corporate insiders took out of the market, $1 went back in.
I realize this doesn't sound terribly bullish, but remember that U.S. executives receive a ton of their pay via stock compensation. Stock options account for nearly half (48%) of CEO pay at Fortune 500 companies. So insider sales always outnumber insider purchases.

Because of this, anytime the sales-to-purchases ratio falls below 20, it's considered bullish... 13 to 1 is pretty bullish.

In dollar terms, insiders bought $297 million worth of stock in November. This isn't far off from the $330 million they bought in August before an 8% market rally. And in November, insiders only sold $3.8 billion worth of stock. That's the lowest November amount since 2002. But this is not a near-term indicator but forecasts 6 months down the road.

So in the middle of 08 the homebuilders, and financial stocks should be outperforming the other sectors. Along with this theme the basic materials should continue to boom to meet the new supply.

Look at the chart, its broken its downward trend if ever so briefly. But recently had a 20% move with a 50% retracement. Build a position for the next year, good entry point. Place stops slightly below the trendline.



EXAMPLES OF INSIDER BUYING

NVR
$52.4 million

Meritage Homes
MTH
$14.9 million

Brookfield Homes
BHS
$5.3 million

Pulte Homes
PHM
$150,000

KB Home
KBH
$93,000