The financial district is seen in Toronto.Tim Fraser/The Globe and Mail
Buying momentum has been picking up in Canadian financial stocks, with the S&P/TSX Capped Financials Index up about 14 per cent this year.
A good chunk of that rally came within just the last few weeks and there's reason for optimism that the trend will continue. Corporate insiders - who tend to be more right in their investment bets than the general public - haven't lost their appetite to snap up more shares.
INK Research, which tracks the buying and selling of shares by officers and directors within their own businesses, notes that its financials sentiment indicator continues to hover near the 200 per cent level. That means there are still more than two companies with key insider buying for every one with selling, despite the sector's rally.
Typically, insider selling picks up into rallies, but even the actual selling tallies of shares are within a normal historic range for financials.
"Insiders appear to be delaying their profit-taking, perhaps sensing greater asset inflation in the months ahead," Ted Dixon, CEO of INK Research, said in a note.
Insiders continue to be particularly bullish in the real estate investment trust sector. INK's indicator for REITs is at 650 per cent. That's where it stood one month ago and means there are more than six companies with key insider buying for every one with selling. "On balance, REIT insiders seem to be betting that higher asset inflation will trump any potential rise in long-term rates," he said.
The INK Research sentiment indicator for TSX-listed stocks overall stands at 92.1 per cent – or a little less than one stock with key insider buying for every one with selling. It hit an 18-month low of 90 per cent last week as the S&P/TSX composite index moved towards the 13,000 resistance level. But the indicator began ticking up again late last week after the Democrats and Republicans reached a budget deal in Washington.
Darcy Keith