ACTV - CDT Insider Sentiment Ratio December 2023: Normal-Positive Sentiment
2024-01-03 00:40:00 ET
Summary
- Despite an impressive +16% gain in the S&P 500 Total Return Index from its recent low on October 27th, insider activity continues to suggest a measured level of positive sentiment.
- The steeper price tags on stocks are not yet deterring insiders from buying their own shares. By our observation, historically, insiders are excellent contrarian value investors.
- Collectively, when viewed as a whole, their contrarian acumen makes insider sentiment a very strong barometer for the strength of recent market rallies.
Free to Move About the Cabin
One heck of a rally. Despite an impressive +16% gain in the S&P 500 Total Return Index from its recent low on October 27th, insider activity continues to suggest a measured level of positive sentiment amongst the highest ranks of corporate America.
In other words, the steeper price tags on stocks are not yet deterring insiders from buying their own shares. By our observation, historically, insiders are excellent contrarian value investors.
Meaning, they routinely exploit their obvious information advantage and buy their respective shares when the stock market underappreciates their value. Collectively, when viewed as a whole, their contrarian acumen makes insider sentiment a very strong barometer for the strength of recent market rallies.
In that context, despite the torrid November-December move, insiders are still finding reason to purchase their shares and that bodes well for the sustainability of these recent gains.
By contrast, note that earlier in the year, insiders did not endorse the summer rally. In fact, as the market rallied +7% at the height of the Q3 returns, we observed some of the lowest levels of insider sentiment all year and ultimately, by November almost all the summer gains had evaporated.
It is worth mentioning that although insider sentiment remains in positive territory, it is not exactly exuberant. Normal-positive is the best way to characterize their mood and for now, that is enough to quantifiably suggest a lower than expected level of go-forward risk in financial markets.
Additionally, from an industry perspective, insider activity remained relatively diverse and that portends a durable market rally as well.
From Pharmaceuticals like PFE to restaurants like CMG to even online pet stores like CHWY insiders from all corners of the industry were eager to snatch up shares.
Expect blue skies ahead.
How it Works
Objective: Predictive model that measures the historical relationship between insider sentiment and the future probability of downside volatility (risk).
Insider Trading Activity: Purchase activity of an insider’s own stock filtered by proprietary parameters to scrub noisy data.
Insight: Executive-level insider sentiment is an indicator of near-term financial market risk.
- Low executive sentiment suggests a high level of risk
- High executive sentiment suggests a low level of risk
Scale: A ratio of current insider trading activity in relation to historical patterns.
- (0 to ?) with a historical median measure of 1
- Below 1 implies an above normal level of risk
- Above 1 implies a below normal level of risk
Frequency: The measure is updated daily and historically been subject to swift and possibly extreme shifts.
*This webpage is updated monthly and provides just a snapshot of the most recent month-end.
Disclosures
This presentation does not constitute investment advice or a recommendation. The publisher of this report, CDT Capital Management, LLC (“CDT”) is not a registered investment advisor. Additionally, the presentation does not constitute an offer to sell nor the solicitation of an offer to buy interests in CDT’s advised fund, CDT Capital VNAV, LLC (“The Fund”) or related entities and may not be relied upon in connection with the purchase or sale of any security. Any offer or solicitation of an offer to buy an interest in the Fund or related entities will only be made by means of delivery of a detailed Term Sheet, Amended and Restated Limited Liability Company Agreement and Subscription Agreement, which collectively contain a description of the material terms (including, without limitation, risk factors, conflicts of interest and fees and charges) relating to such investment and only in those jurisdictions where permitted by applicable law. You are cautioned against using this information as the basis for making a decision to purchase any security.
Certain information, opinions and statistical data relating to the industry and general market trends and conditions contained in this presentation were obtained or derived from third-party sources believed to be reliable, but CDT or related entities make any representation that such information is accurate or complete. You should not rely on this presentation as the basis upon which to make any investment decision. To the extent that you rely on this presentation in connection with any investment decision, you do so at your own risk. This presentation does not purport to be complete on any topic addressed. The information in this presentation is provided to you as of the date(s) indicated, and CDT intends to update the information after its distribution, even in the event that the information becomes materially inaccurate. Certain information contained in this presentation includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results, and such differences may be material.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors
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CDT Insider Sentiment Ratio December 2023: Normal-Positive Sentiment