When it comes to the markets, it’s not often I’ll rely on insider buying trends as an indicator of what’s to come. While I like to review insider buying and selling habits of stock candidates, I’ve found that you just can’t trust it as a reliable indicator.
Insiders in the oil sector – for example – were unaware of further declines in oil. We’ve often spoken about the great supply-demand imbalance… and why oil could slip further. Unfortunately, insiders seem to have ignored the facts.
On May 11, 2015, CEO, chairman and president of Wells Fargo, John Stumpf bought 180,000 shares of CVX for $19.5 million at an average price of $108.10 each. At the time, oil had just rebounded off $42.85 lows to $61.36.
Still, though, the bottom wasn’t in… and soon to be realized when oil slipped to $37.75 lows by August 2015. And as oil pulled back, so did CVX to current lows of $86.07 – a 20% decline from the insider’s average buy in price.
While insiders are thought to know everything about their companies and industries, they don’t always time their buys well… or have a full understanding of what’s greatly impacting their industry.