Buybacks Snap Back Amid Feverish Selling by Corporate Insiders
After gutting buybacks to conserve cash, American corporations are repurchasing shares again. Corporate officers, on the other hand, are showing a bit less enthusiasm for their employers’ shares.
In the first two weeks of the new year, a total of 1,000 insiders sold their own stock and 128 bought shares, leaving the sell-to-buy ratio poised for the highest monthly reading in data going back to 1988, according to Washington Service. Meanwhile, corporations announced $29 billion of buybacks over the stretch, up 46% from a year earlier, data compiled by Birinyi Associates show.
While there’s noise in the data -- one number is executed sales, the other planned purchases, and the latter is a much bigger sum -- an investor trying to glean a signal could be forgiven for being confused. Share buying by corporate officers is dwindling after a 10-month rally drove valuations to levels not seen since the dot-com era. Companies are evincing less concern as they seek a destination for their cash.
“Buybacks are a capital allocation decision with other people’s money whereas you’ve got to be really bullish to put your own money in there,” said Bill Callahan, an investment strategist at Schroders. “Managers know their companies are fairly valued and they’re not going to rush to put more of their own money into the companies.”
It’s the not first time that companies and their executives have diverged like this. In 2014, insider buying dried up while corporate America spent a near-record amount of money on buybacks. That year, the S&P 500 advanced 11%. Since the end of December, the S&P 500 Buyback Index has climbed almost 6%, compared with a gain of 1.1% for the broader gauge.