Investors who are selling stocks fearing a recession may stop and pay more attention to the frenzy that executives of U.S. listed companies are buying into their own stocks.

Contrary to sluggish market sentiment: Corporate executives are hunting for dips

During the S&P 500’s longest weekly decline in more than 20 years, public company insiders who bought at the bottom of the market in 2020 are trying again .

According to statistics from Washington Service, which specializes in tracking the stock buying and selling of insiders of listed companies,

In May this year, more than 1,100 executives of listed companies bought shares of their own companies, and the ratio of insiders buying and selling shares rose to 1.04 from 0.43 in April, which is expected to be the first time since March 2020 that the ratio of buying and selling shares exceeded 1. moon.

Among them, public company executives, including Starbucks (SBUX.US) interim CEO Howard Schultz and Intel (INTC.US) CEO Patrick Gelsinger, bought their own shares during the market rout. .

What does it mean for company executives to bargain at this time?

Executives know better than anyone how their companies are doing, and if they sell sharply, they are often interpreted by investors as a peak in the stock market, while a big buy is seen as the stock market still has room to rise.

It is worth noting that in August 2015 and the end of 2018, the proportion of insiders buying and selling stocks also increased significantly. The former happened before the market bottomed, while the latter happened just at the bottom of the market.

Icon Advisers Inc. CEO Craig Callahan said:

“This may be the result of investors looking at the market at the macro level and insiders at the company fundamental level. But we believe that the company fundamentals view is generally correct.”

At present, U.S. stocks are undoubtedly still in a period of volatility, and despite the rebound on Monday, whatever the reason, the prevailing sentiment in the market remains that the worst is not over for the stock market .

Nicholas Colas, co-founder of DataTrek Research, said:

“What we can be sure of is that the valuation of any single stock or the market as a whole depends on whether investors’ confidence in future cash flows is going up or down, and right now, confidence is going down. It’s not because the stock market is expected to be there. recession, but because uncertainty about the profitability of the S&P 500 is growing. ”

However, if public companies’ attitudes toward their own stocks do provide some clues, things may not be as bad as feared. Right now, it’s not just insiders that are adding to their companies’ stock holdings, companies are spending more to buy back stock .

According to data compiled by Birinyi Associates,

U.S. companies collectively have announced plans to buy $666 billion in stock since January, which is 19% higher than the total planned for the same period a year earlier.

John Carey, managing director and portfolio manager at Amundi Asset Management, said:

“It’s encouraging because they have enough confidence in their business and are investing more. We’ll see if this trend continues, but overall it’s a positive sign. “

Even though U.S. stocks have abused people thousands of times, “funds have not completely surrendered”

Analysts at major Wall Street investment banks have noticed that despite the flock of institutional investors, retail investors are still “holding on” to U.S. stocks.

Goldman Sachs trader Scott Rubner, who tracks the flow of money in the market, noted:

“Professional investors are focused on shorting or basically running out of sales, and the only people who haven’t sold (US stocks) are retail investors. This is reflected in the past 74 weeks, only $2 out of every $100 invested in stock market mutual funds and ETFs. redeemed.

As long as retail investors can hold on, maybe the market won’t crash. Retail investors will only be disappointed and panicked if the market falls sharply from its current level, which is another 10% lower than it is now. “

And as the 2022 sell-off nears its sixth month, investors have also been looking for signs of a bottom. According to John Stoltzfus, chief investment strategist at Oppenheimer,

Severe sell-offs are not uncommon at a time when the Fed is tightening policy, with the market appearing to be “severely oversold,” with even stocks with strong cash flow and profitability being hit by sharp declines.

“We remain bullish on cyclical stocks over defensive and for-profit tech companies whose services and products are deeply embedded in the lives of businesses and consumers. We look forward to the economy and markets emerging from times of heightened anxiety and crisis ”

Analysts at Jefferies also believe that some investors have overreacted to extreme interest rate scenarios in the form of “overdiscounting”, which is fully reflected in stock valuation levels.

Wells Fargo said it was suspending its negative view of growth companies mainly because bearish sentiment in the market has recently reached its limit.

This article is reprinted from: https://news.futunn.com/post/15803851?src=3&report_type=market&report_id=206460&futusource=news_headline_list
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