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Guru Insider Research (III): Can Aggregated Insider Trading Activities Predict the Market of Different Sectors?

Can Aggregated Insider Trading Activities Predict The Market Of Different Sectors?

July 13, 2010

This is the third article in our Guru Insider Research series. We have found that aggregated insider trading activities can predict the market and help investors locate the market bottoms during market crashes. The question we like to answer here: Can aggregated insider trading activities in a sector predict the future market return in this sector?

These are the links to the previous two articles

In the second article we have found that insiders as a whole are not only smart sellers, but also insider buyers. The ratio of insider buys over insider sells can serve as a good indicator for market bottoms. In this article we like to show that this conclusion can also be applied to the market sectors.

We have studied the aggregated insider trading activities within the different sectors. The sector insider trading activities are compared with the ETF in this sector. These are the sectors and the corresponding ETFs.



SPY Broad Market
XLE Oil & Gas
IYM Basic Materials
IYJ Industrials
IYK Consumer Goods
IYH Health Care
IYC Consumer Services
IYZ Telecommunications
IDU Utilities
IYF Financials
IYW Technology

As shown in the broad market, the ratios of aggregated buys to sells in different sectors show that this ratio can predict the returns in the sectors, too. These are the ratios and the corresponding sector ETFs from 2004 to current.

Sector: Oil & Gas


Sector: Basic Materials


Sector: Industrials


Sector: Consumer Goods


Sector: Health Care


Sector: Consumer Services


Sector: Telecommunications


Sector: Utilities


Sector: Financials


Sector: Technology


We can see that the ratios of the aggregated insiders buying over selling do reflect their confidence in the future sector returns, and the ratios reach maximum when the best buying opportunities come.

GuruFocus is developing new features for idea generations and broad market indications based on the insider activities. These features will be released soon to subscribers. In the meantime, you can access insider related features:

  • CEO Buys, CFO Buys: Stocks that are bought by their CEO/CFOs.
  • Insider Cluster Buys: Stocks that multiple company officers and directors have bought.
  • Double Buys:: Companies that both Gurus and Insiders are buying
  • Triple Buys: Companies that both Gurus and Insiders are buying, and Company is buying back.

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About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now pre-order his book Invest Like a Guru on Amazon.

Rating: 2.8/5 (24 votes)



Halis - 6 years ago    Report SPAM
Looks to me like they are selling into the down periods after they have already started. I can't be sure, but I would bet that the trading activities of regular people would look similar. People in general tend to sell as stocks go down and buy as they go up. In fact, up and down, in this context, depend on people doing just that.

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