Are Nasdaq100 Insiders Dumping Stock?

Alan Abelson notes this in this week’s Barrons that the top 8 stocks in the POWERSHARES QQQ exchange-traded fund for the Nasdaq 100 — better known as just “The Qs” (QQQQ) — have seen some insider selling.

Abelson specifically notes Alan Newman’s CrossCurrents advisory letter: Newman’s survey of insider transactions in the top eight issues in the ETF performed on May 10 discovered sometihng rather astounding:

“There were 231 sellers and three buyers, which works out to a somewhat lopsided ratio of 77 to 1. All told, the insiders sold 59.8 million shares and purchased 15,200 shares, a sell/buy ratio of 3,933 to l. Not exactly a resounding vote of confidence in the prospects for their companies.

Moreover, Alan notes, analysts are just as positive on the QQQ leaders as they were back in March 2008 before a 37% fall in price. At that time, 74.1% of the recommendations were Buys and 2.9% were Sells. As of May 10, 2010, 77.7% were Buys and 3.6% Sells. The more things change, we guess, the more things stay the same, especially on Wall Street.

Insiders are hardly infalliable investors and, as Alan observes, their investment habits are not a timing indicator. Still, they do tend to know a bit more about the company and its outlook than the analysts or the folks buying the stocks they’re so determinedly selling.

What this says about valuation, the market, or the recovery is up for debate. But its certainly worth thinking about . . .


Orgy of Speculation
Barron’s, May 29, 2010

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