Insider Stock Buying Surges to 8-Year High

(Bloomberg) -- A group of optimists who’ve proved prescient in the past have stepped up their buying even as U.S. stocks teeter on the brink of a bear market.

The number of corporate executives and officers scooping up shares of their own companies has doubled in the past two months from the prior two. As a result, insider buyers are outpacing sellers by the most since August 2011, data compiled by The Washington Service showed.

With the S&P 500 on the brink of a bear market, the increase in demand from companies’ highest-ranking employees could be seen as a vote of confidence in stocks even as anxiety rises over Federal Reserve rate hikes and political turmoil in Washington.

Profits from S&P 500 companies are expected to rise to a record $173 a share next year. At 13.6 times forecast earnings, the index is trading at 9 percent discount to the average multiple since the bull market started in 2009.

“Insiders are pretty well informed at the micro level of their businesses,” Todd Fungard, who oversee $1.2 billion as chief investment officer of McQueen, Ball & Associates Inc., said by phone. “It’s a good sign that business leaders still see demand at their companies and feel comfortable buying their own stock despite the headline risk.”

The last time insider buying spiked in this fashion, in August 2011, the S&P 500 was in the middle of a 19 percent retreat before staging a 10 percent rally in each of the next two quarters.

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