Stock Buybacks & Insider Selling Hitting All-Time Highs

Corporate Executives Are Selling Stocks In Record Numbers

Corporate insider selling has hit record numbers in May and June. They have dumped over a combined total of $17.6 billion dollars worth in that time period.

Of course, the dump only comes after a pump, right? The fuel behind the pump has been stock buybacks in which 2018 has been a record year due to the corporate tax breaks. A combined total of $678.7 billion worth of buybacks was announced in the first two quarters of 2018. Both quarters have beaten any other quarter in history.

$6.3 Trillion in Corporate Debt

Corporations are not just borrowing when times are tough, but they are borrowing when times are good.

US companies now owe a combined total of $6.3 TRILLION. This amount of debt is now higher than ever before, and it doesn’t even include bank debt!

Now with interest rates rising what are companies doing? Are they paying off this debt? Nope. They are buying back their own shares, often at historical highs!

Buybacks are good if the company stock is actually undervalued (where insiders would also be purchasing stock themselves), but at this late market cycle is that really where stocks are priced? Would it not be better to use this one-time cash infusion to pay off debt and brace for the recession that is bound to happen?

Chinese Money is Trickling into US Investments and Pouring into Europe Instead

By a ratio of 9-to-1, more Chinese money is flowing into the European stock market instead of the United States due to the ongoing trade war. In money terms, $20 billion went to Europe and only $2.5 billion went to North America in the first two-quarters of 2018. This is a huge drop compared to even 2017, which was in itself a huge drop from 2016.

Not only is very little new Chinese money entering the American market, large sums are leaving as Chinese companies are divesting. $9.6 billion has already left, and at least another $5 billion is on its way out soon.

Sector Buyback Leaders

(Above chart only using data as of the end of May)
Tech and healthcare, followed by financials are the leading stock buyback sectors.

When I take a snapshot of insider sales, I see these sectors again.

VERY few purchases with plenty of sales – and this is just one day of the market!

Tellingly, the healthcare insiders are unloading their holdings the most. Just $46,356 in purchases and $66,320,133 in sales on Friday. I would say that insiders see this as a prime time to get out of that sector.


Buybacks are at peak highs and so are insider sales. They are using the one-time tax break to enrich themselves. On one hand, they are buying with corporate cash and on the other, they are selling all they can for individual gain. To hell with the future of the company and shareholders, times are great!

To put it bluntly, its a racket the mob would be proud of.

It is also worrying as stock buybacks do not increase real earnings even if it increases their EPS. Fewer shares outstanding and the same income will mean a higher EPS, which is a statistic that is heavily tracked and so makes the company appear to be doing better.

With the Federal Reserve increasing the interest rates, debt at all-time highs, China vastly decreasing investments in North America, and the only thing seemingly holding up this market is a record amount of buybacks, I don’t think the markets are being built on a strong foundation.

Just like its always darkest before the dawn, it is always brightest before the storm. And just like always, the next recession will come as a complete surprise to many, even if all they had to do was look up at the sky.

That being said, I am not sure that even when this “sugar-high” of stock market buybacks ends it will be enough to bring on the crash. But it might be strong enough to ensure a repeat of the drop we had in February of this year.

This all being said, nobody knows the future. Only time can tell.


  1. Hustle Hawk

    Interesting post. This might be confirmation bias…but I’ve been thinking along the same lines myself. I think there are a couple of other factors worth mentioning also:

    1. Because stock based compensation is used so heavily in some industries (such as IT) another function of the stock buybacks is that they help to keep the price of the stock stable as insiders (stock remunerated employees) liquidate their holdings on a periodic basis to access money instead.

    2. One other factor that may be supporting the US stock market at the moment is a ‘flight to quality’. The strengthening dollar is an ever-growing problem for many emerging market economies that have borrowed heavily in dollars (instead of their own local currencies). As a result, some investors may be moving assets out of emerging market equities and into what they perceive as being the relatively stronger US equities market.


    1. MrDD

      Good points, certainly worth keeping in mind.

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