Wall Street Insiders Are Selling – Here’s How to Spot the Buyers!

The stock market has been on fire recently, with the S&P 500 hitting a series of new highs. But based on the data, corporate insiders seem to be taking the other side of that trade – and selling into the “great bull market of 2024.”

As you can see in the chart above, the ratio of insider buying to insider selling has jumped – to the highest level in over three years.

Recently, corporate insiders have been selling their own companies’ stock at about five-times more than those who were willing to buy shares. And since insiders are best positioned to know the business trends of their own companies, it’s a bit of a red flag.

That’s especially true considering the elevated valuation of the stock market today.

Granted, insiders could sell their own shares for any number of reasons. Perhaps they’re funding a new summer home in the Hamptons, a winter retreat in Palm Beach, or maybe the tuition for Thurston Howell III at Harvard or Yale.

But the timing here is worth noting – the last time insider selling accelerated like this was in July, just before the S&P 500 dropped nearly 10% in a matter of weeks. And according to Bloomberg, the only other time the insider selling ratio rose to these levels – in recent years – was prior to the 2022 bear market.

Spotting Opportunities with Money Movers

Here’s the good news: Our TradeSmith Finance platform makes it easy to track money flows of corporate insiders as well as big institutional investors. With our Money Movers tool, you can quickly spot which stocks have money flowing in from insiders and institutions – which you may want to avoid.

Even better, with our Money Movers indicator you can see at a glance which stocks have consistent insider buying, potentially leading you to profitable new opportunities.

This is especially true when many insiders are selling as they are now. That’s when insider buying really stands out as a potential buying opportunity!

With that in mind, I’ve put together a simple screener using our TradeSmith Money Movers basket to identify stocks to scan with both insider and institutional buying. Below is a screenshot of the filters I used to create the list:

Start by selecting the filters for Asset Type > Stock and TradeSmith Baskets, then scroll down to choose Money Movers and sort by Descending. That’s really all you need to get the full list of stocks with insider and/or institutional money inflows.

For an added layer of timing, I included filters for Cycle Turn Area > Valley and Cycle Period > Composite Cycle. Timing is everything, especially when it comes to trading.

These filters will screen for stocks in the Valley turn area, according to our Composite cycle – a blend of four timing cycles across different time periods – which suggests the stock is likely to move higher in price.

When I ran this screen yesterday, I got 83 results, showing that not all insiders at every company are selling these days. Due to space constraints, here’s a screenshot of the top 15:

Mike Burnick’s Bottom Line: I frequently revisit this screener and add additional filters to it, like our TradeSmith timing cycles shown here. You can also adjust it by including extra fundamental filters such as price-earnings ratio or dividend yield. Another option is using it alongside our TradeSmith Business Quality Score. There’s no limit to how you can customize a screen to make it your own.

Just remember, if you do come across new ideas with this – or any of our powerful TradeSmith screeners – it’s important that you do your own analysis of each stock. Be sure any idea syncs with your own personal investing objectives and risk tolerance.

Good investing!

Mike Burnick
Senior Analyst, TradeSmith

P.S. The S&P 500 may be hitting new highs, but corporate insiders are selling their shares into the strength. And while the bull market of 2024 continues roaring on for now, insiders often know just when to get out… before the run comes to an end.

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