Skyscrapers that are home to big Canadian banks hover over a Bay Street intersection in Toronto.Gloria Nieto/The Globe and Mail
Corporate insiders weren't standing still while the TSX slipped into a full-fledged correction last week – they were snapping up beaten-down shares.
Yet, there was no across-the-board buying frenzy as markets took their harshest pounding this year. Insiders in energy, basic materials and consumer stocks were active, but officers and directors working in the financial sector were showing little appetite to buy, according to Ted Dixon, CEO of INK Research.
INK's 30-day overall indicator for the TSX, which measures the ratio of stocks with key insider buying versus selling over the past month, rose to over 209 per cent on Friday. At 200 per cent, there are twice as many stocks with key buying than selling. INK's longer-term indicator, which measures filings over the last 60 days, is now at 126.8 per cent – its highest point of the year – and up from 113.8 per cent two weeks ago. A reading of 100 per cent means companies with buying and selling activity are evenly matched.
Possibly thanks to lower prices at the gasoline pumps, INK's 30-day indicator for the consumer non-cyclicals sector skyrocketed last week to 800 per cent. Falling oil prices leave consumers with more money to spend, and also reduce the transportation and other input costs for many companies in the sector.
Energy insiders were the second most enthusiastic buyers on a sector basis over the past month, with INK's 30-day indicator rising to above 400 per cent. Insider sentiment remains much higher for Canadian energy stocks than their U.S. counterparts, possibly in part because of the falling Canadian dollar and much improved price spreads for some Canadian crude blends.
"On the positive side, the willingness of insiders to buy economically sensitive stocks reinforces our view that the sell-off represents a resetting of stock valuations, which were ahead of fundamentals due to central bank loose money," said Mr. Dixon.
While that may signal some degree of confidence in the economic outlook, the lack of buying in the financial sector points to a skepticism among insiders about central banks and their ability to reign in the still rising prices for housing in this country, he said. INK's 60-day financial sector indicator remains at about 170 per cent.
"The bottom line is that few non-REIT Canadian insiders (in the financial sector) are taking advantage of the recent drop in share prices to buy," Mr. Dixon said.
Darcy Keith