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Insiders: Not Scared Off by the Big Bad Bear
Posted by: Dr. Paul Price (IP Logged)
Date: May 17, 2014 10:38PM
Don't Fall Prey to Ratings Whores
The media loves hyperbole. It is good for ratings. Bearish sound bites were being spewed from all sources early Thursday morning after billionaire hedge fund manager David Tepper (Trades, Portfolio) publicly took a cautious stand on the market.
Futures went decidedly negative. At the 9:30 AM opening things got pretty ugly. Bears seemed to be everywhere.
The DJIA gapped down and ultimately bottomed more than 200 points below Wednesday’s closing level. People that had been clamoring for more equity exposure on Monday and Tuesday, as the DJIA and S&P hit all-time highs, seemed desperate to dump shares more than 300 Dow points lower.
By week’s end the DJIA and SPY had partially rebounded. The SPY dipped by just 0.03% over the full week. It is now up 1.6% YTD.
The Nasdaq Composite actually gained 0.46% from the previous Friday’s close although it is the lagging major index so far in 2014 @ (-2.06%) YTD.
The Thomson Reuters Insider Sell/Buy ratio turned clearly bullish. This is a very good short term (weeks to months) indicator as it measures ‘real money’ trading rather than simply sentiment. When cold cash is at stake you tend to get more reliable data.
It was noteworthy that Barron’s report on Insider Activity showed two separate buys on Liquidty Services Inc. (LQDT). GuruFocus published a bullish article on this topic right about the same time that these trades were taking place Stay Liquid My Friend.
The purchases totaled more than 215,000 shares at an average price of $12.62. LQDT closed out the week at $13.91, 10.2% higher than that average insider purchase price.
When it comes to making money you are always better off trading on long-term fundamentals, rather than short-term, media stoked emotion.
Disclosure: Short LQDT Dec. $10 & $12.50 puts
Stocks Discussed: DJIA, SPY, LQDT, QQQ,