Jeff Bezos just unloaded $3.1 billion in stock amidst a flurry of insider selling. Is this a warning sign for the broader market?
The stock market is fighting to eke out a fifth-straight day of gains on Thursday. The Dow Jones Industrial Average (DJIA) ticked about 20 points higher this morning, though the S&P 500 and Nasdaq edged lower.
After a strong week on Wall Street, there are some warning signs flashing. Not least, Jeff Bezos just dumped $3.1 billion Amazon shares.
Insider selling of this magnitude is often a “warning sign” according to Jonathan Moreland, director of research at InsiderInsights, speaking to Bloomberg last month.
I’m not prepared to say everybody should sell everything and short the market because of the recent insider data. The way I’m using it is, I’m more comfortable selling some of my winners. We still don’t trust the market’s recent recovery.
Video: Why is Jeff Bezos selling so much stock?
Bezos isn’t the only one offloading shares at these levels. More than 1,000 corporate execs sold shares in the July rally.
Traders are fighting to keep the party going this morning after yesterday’s strong session. It’s not clear whether they’ll succeed.
As of 9:52 am ET, the Dow as up 19.27 points or 0.07% at 27,220.79.
The S&P 500 dipped 0.11% to 3,324.17, while the Nasdaq slid 0.2% to 10,976.99.
Bezos picked a good moment to sell. Amazon stock is at a record high, having soared almost 70% since the start of the year. The Amazon boss has now cashed out a total $7.2 billion this year – more than double what he sold in 2019.
He’s not alone. Morgan Stanley’s CEO James Gorman cashed out $8 million in shares last month. BlackRock’s Larry Fink sold $24 million. More than 1,000 insiders (corporate execs and and board members) offloaded stock in July.
And the ratio of insider selling is pretty shocking. 24 million tech shares were sold by insiders in July. Only 4.2 million were purchased. This 5-1 imbalance has only happened twice before in the last 30 years.
As Moreland explained, it’s not a case of “selling everything” but it could be a warning sign. Insiders know their companies better than anyone else and their activity can often signal market tops and bottoms.
This happened back in March during the coronavirus selloff. Insider buying hit a nine-year high as the stock market hit its lowest point. Megan Horneman, director of portfolio strategy at Verdence Capital Advisors explains:
When insiders are buying, they think their companies are well undervalued.
The opposite it also true. If they’re selling, they might think the stock is overvalued. And when 1,000 are selling at the same, maybe the whole market is overvalued.
All eyes are on Congress again as lawmakers work towards a second relief package agreement. Republicans and Democrats both hope to reach an agreement by Friday. Speaker of the House of Representatives Nancy Pelosi struck a cautiously optimistic tone after yesterday’s session:
I feel optimistic that there is light at the end of the tunnel, but how long that tunnel is remains to be seen.
White House chief of staff Mark Meadows was less positive, claiming the two sides were still “trillions of dollars apart.”
Elsewhere, investors are digesting this morning’s unemployment data. Although jobless claims beat expectations and fell to their lowest level since the pandemic began, more than 31 million Americans are still receiving some form of unemployment assistance. That number increased during July.
Last modified: September 23, 2020 2:10 PM