In this once-in-a-generation market meltdown, brave souls in the business world are living up to their reputations as value investors.
Corporate insiders worldwide are buying the most shares for every one they sell since 1999, according to data from 2iQ Research. Managers and directors have snapped up 4.5 times more equity in their own firms than they’ve sold this month, as of Monday.
All in, they’ve purchased €86.6m worth of shares so far in March, the most since 2015. It’s a sign executives now see their companies as alluringly cheap after the 30% plunge in the MSCI World Index from its record. The bargain-hunting drive reached a record in Italy and Spain, two economies in lockdown as the coronavirus spreads.
Since executives supposedly have superior knowledge about their own businesses, such purchases add to the case that shares have fallen beyond their fair value, the thinking goes.
“Insiders are buying massively and in the past they have had quite good timing to pick the market bottom,” said Patrick Hable, a Frankfurt-based managing partner at the data provider.
“It would be extremely worrying if they are selling now, especially since it’s in their nature to buy when their stock is down,” he said.
In Europe, insiders have bought €20.6m worth of stock so far in March, already the highest since late 2018.
Insider buying has been especially pronounced in energy and financials, two of the hardest hit industries amid the market volatility unleashed by the widening viral outbreak. Sales have exceeded purchases in utilities, Mr Hable added.
The data dovetails with findings from other sources. In the US, insiders’ buy-to-sell ratio had jumped to the highest since 2011, according to the Washington Service, an analytics firm.