AFMC - CDT Insider Sentiment Ratio November 2023: Normal-Positive Sentiment

2023-12-04 10:00:00 ET

Summary

• Insider activity quickly rebounded during the first couple weeks of November.
• We note that the broadening-out of insider activity is consistent with the broadening-out of the 2023 stock market rally.
• The positive trend in insider activity, in combination with the broadening-out of the market rally are positive signs and suggest that near-term market risks remain limited.

Free to Move About the Cabin

Coming out of the buyer’s strike at the end of October, insider activity quickly rebounded during the first couple weeks of November. In part, the quick insider hiatus was likely driven by seasonal motives rather than financial. In the weeks leading up to earnings season, most companies maintain corporate governance policies that restrict people of station at a company from purchase/selling shares outside the bounds of a prescribed 10b5-1 plans ( More Information ). Although we have built some compensating factors for such seasonal phenomenon, we cannot fully cope with their effect, which is why a trend tracking versus absolute measure is our preferred way of keeping tabs on insiders.

With regard to trend tracking, in our last monthly update we said we would look to the November insider activity to affirm the positive trend that started back in September or the couple of negative datapoints that we observed at the end of October. Clearly, the positive sentiment prevailed with the insiders riding the market rally. As the market had its best month since July of 2022 (+9.13%), the breadth of depth of insider activity was quite impressive. Insiders from casino operators such as PENN , to semiconductor manufacturers like QRVO and even chemical companies like DOW gobbled up their shares this Thanksgiving. We note that the broadening-out of insider activity is consistent with the broadening-out of the 2023 stock market rally, as indices outside of the highly concentrated S&P 500, such as the Russell 2000 (+9.2%) and the less popular equal-weighted S&P 500 (+9.2%) also participated in this monthly pickup.

The positive trend in insider activity, in combination with the broadening-out of the market rally are positive signs and suggest that near-term market risks remain limited. For now, it seems that Santa is not expected to experience turbulence this Christmas and may just deliver on the promise of his namesake Santa Claus rally for investors this holiday season.

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.

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