The last few years have seen the so-called FANG stocks (Facebook, Amazon, Netfliz, & Google (Alphabet)) have dominated the markets…
Which has dragged technology stocks to dot-com peak levels relative to financials…
And this momentum has done what it always does – spark mom-and-pop to chase the quick buck as Tech stocks have seen record inflows as they have emerged as the “defensive growth” sector of the late market cycle…
But while ‘average joe’ is busily loading up on hyper-valued tech in his 401k like never before, insiders at the FANG stocks have been puking their own shares at a record pace this year…
Senior executives and directors of Facebook, Amazon, Netflix, and Google parent Alphabet have dumped $4.58 billion of stock this year, according to data compiled by Bloomberg. They’re on track to exceed $5 billion for the first six months of 2018, the highest since Facebook went public in 2012.
Jonathan Moreland, director of research at InsiderInsights.com, which analyzes such transactions.
“If they continue to sell into weakness, then that’ll be a strong indicator of insider sentiment,” Moreland said in a phone interview.
During the tech bubble two decades ago, “the real tell was in the early aughts when the stocks were down 20, 30, 40 percent and insiders were still selling.”
This massive insider-selling in the market-driving FANG stocks confirms the recent warning from the SEC Commissioner about insiders selling stocks into their company’s buyback programs…
First, the percentage of insiders selling shares more than doubled immediately following their companies’ buyback announcements as many of the stocks popped.
Daily stock sales by the insiders rose from an average of $100,000 before the buyback announcements to $500,000 after them. The sellers received proceeds totaling $75 million more than had they sold before the announcement, the study concluded. At 32% of the companies, at least one insider sold in the first 10 days after the buyback announcement.
Second, the study found that in the days leading up to share repurchase announcements, the companies’ stocks underperformed the broader market by an average of 1.4%. During the 30 days after the announcement, the companies’ stocks outperformed the overall market by an average of 2.5%.
So who is the real sucker at this table? If you don’t know by now… it’s you!!
Because the smart money is bolting for the exits…
The Smart Money Flow Index (SMFI) is a leading-indicator in markets. That means when the SMFI drops sharply, usually the equity markets are right behind it.
And we haven’t seen the SMFI drop this much since the Great Recession of 2008 and the 2001 Recession. . .
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