If So Many Execs Are Feeling This Confident In Their Own Stocks, Should We Be Too?

If So Many Execs Are Feeling This Confident In Their Own Stocks, Should We Be Too?
Theodora Lee Joseph, CFA

over 1 year ago1 min

Mentioned in story

More and more executives have been investing in their own companies’ shares lately, in a practice known as insider buying (not to be confused with insider trading, which isn’t regulated, recorded, or public). Just look at the chart above, which shows the net difference between the number of insiders who are buying shares and those selling them. You can see that buyers have been outpacing sellers at their fastest clip since 2020.

That’s a good sign, with this dynamic historically preceding a rebound in the S&P 500. That’s probably because head honchos who buy shares in their own firms are clearly feeling confident about their company’s outlook, based on what they’re seeing from the inside. The more of them we see demonstrating this sort of confidence, the more likely it is that stocks as a whole are going to outperform.

Of course, while insider buying is encouraging, it’s far from the only driver of stock market performance. Instead, think of it as one more checkbox on the “pros” list. And when you do your own research (you can see details on insider buying here), be sure to check that execs’ stock purchases weren’t motivated by an options close date or discount program – both of which are usually disclosed in the company’s annual report.

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