If corporate insiders are right, the future holds a lot more promise for stocks in Canada than in the U.S.
U.S. insiders have been selling into the recent stock market rally that has seen progressively higher records being reached in the S&P 500 and Dow Jones industrial average indexes. According to INK Research, which monitors stock transactions by executives and directors within their own businesses, there are more than four stocks with key insider selling in the U.S. for every one with buying.
Given that insiders are often contrarian investors - selling when they feel asset values are getting overheated and buying when they feel stocks are going for discount prices - that may not come as a big surprise.
What may be more interesting is how different the Canadian and U.S. markets have become. In Canada, there are more than two stocks with key insider buying for every one with selling.
Of course, the Canadian market has woefully underperformed its U.S. counterpart this year, making it fertile ground for bargain hunters. But another key reason insider buying is so much more pronounced here is that insiders are aggressively snapping up materials stocks - especially beaten down gold miners.
INK’s gold indicator - which tracks insider transactions on all Canadian-listed gold stocks and is heavily influenced by junior miners - remains above 800 per cent, meaning there are more than eight stocks with key insider buying for every one with selling.
A few weeks ago, it peaked at just over 1,000 per cent. It has come off its highs as gold stocks bounced off the April lows, noted Ted Dixon, CEO of INK Research.
“While much of the gold miner buying is being driven by small exploration companies, both Barrick Gold and Kinross are in the group’s top 5 stocks with insider buying,” Mr. Dixon said in a note.