Bull signal for bank stocks: Insiders take few profits

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The S&P/TSX financials sector index has rallied about 10 per cent over the past 52 weeks - and nearly half of that gain was from this year.

Curiously, insiders who work in the sector and know it better than most are taking few profits.

For those betting on a further rally to come in banking and insurance stocks, that's a good sign.

According to INK Research, which monitors buying and selling of stock by officers and directors within their own businesses, there are about two stocks with key insider buying within the TSX financial sector for every one stock with selling. (INK's financials indicator is at about 200 per cent; a reading of 100 per cent would mean an equal number of stocks with buying as there are selling.)

"Insider buying was widespread, ranging from large-cap names such as Manulife Financial to smaller boutique stocks such as resource lender Marret Resource," commented INK Research CEO Ted Dixon in a note this week.

Insiders may be continuing to draw their enthusiasm from central bank loose monetary policy.

Bank of Canada governor Mark Carney last week suggested he was in no rush to tighten policy and raise interest rates. "If nothing else, that should allay fears that Canadian banks will see a sharp contraction in borrowing in the short-term," notes Mr. Dixon.

Meanwhile, if the global economy continues to show signs of further recovery, bond interest rates should creep up, in Canada and elsewhere. That should give insurance and bank stocks a boost.