CORRECTED – Small-cap execs buying own shares in bet on rebound

(Corrects date to Feb. 9 in second paragraph)

By Edward Krudy

NEW YORK, Feb 16 (BestGrowthStock) – Corporate managers at small
cap U.S. companies are buying their own stock at a pace not
seen in a year, a sign they see the recent pullback in equities
as an opportunity.

Data compiled by showed insider buying at
companies in the small-cap Russell 2000 index (.RUT: ) was at its
strongest in the seven-day period ended Feb. 9 since the end of
March 2009, shortly after markets hit a 12-year low, though it
is still historically low.

Corporate executives sold stock for much of last year as
the S&P 500 index (.SPX: ) rallied more than 67 percent from its

But now, with the Russell 2000 having fallen almost 10
percent in three weeks since hitting a 15-month closing high on
Jan. 19. insiders at smaller companies are scooping up shares.

Some analysts say trading by insiders at small and mid cap
stocks can be a leading indicator for the wider market.
Executives at those companies have more incentive to buy than
big shots at larger companies.

“More often than not (insider trading at) small cap stocks
tend to precede large caps,” said Kevin Leng, head of research
at InsiderCow, which tracks insider trading. “If you are a VP
at a small cap company you make decent money but no way
comparable to a large cap executive.”

Generous stock option schemes for large cap executives
makes accumulating stock in the open market less appealing,
Leng said.

“If you’re the CEO of GE (GE.N: ) versus the CEO of a small
cap bio company your incentive to buy your own stock is
probably very different,” he said.

Buying in Russell 2000 companies is outstripping selling
for only the third time since the end of the second quarter of
last year.

According to there has been wide-ranging
buying across small cap sectors. The financial sector has led
the way but there has also been buying in other sectors such as
biotech and energy.

To be sure, executives buy shares at times without regard
to the movement in the stock, and data on buybacks in the last
decade shows executives often purchase at the wrong time,
buying when stocks are near a peak.’s data is based on open market buy and
sell transactions and cuts out other transactions, such as
those resulting from preferred stock, which can muddy the

Over the last four weeks, there has been a 35 percent
increase in the number of small cap companies with insider
buying and a 19 percent increase among mid caps, according to
data from Form4Oracle, which also tracks insider trading.

During the same period the number of large cap companies
experiencing insider buying fell 3 percent.

The S&P 500 has lost more than 8 percent in three weeks
since hitting a 15-month closing high on Jan. 19,

Despite the uptick in the small cap space, insider buying
remains low on a historical basis. Corporate insiders bought
$1.6 billion of their stock in the 60 days from the end of the
first week of February, down 50 percent from $3.2 billion in
the same period a year ago, according to data from TrimTabs

Insider buying has been below $1 billion for 10 consecutive
months, according to Trimtabs, while insider selling has been
elevated, peaking last year at around $7 billion in August.

Insiders “tend to be sensitive to fluctuations,” said Alex
Romayev, owner & co-founder of Form4Oracle. “But this is still
a small spike compared to the long-term trend.”

Stock Investing

(Editing by Leslie Adler)

CORRECTED – Small-cap execs buying own shares in bet on rebound