Execs bought $171M of their own companies' shares, the second highest level in two years.
September 5, 2004: 2:49 PM EDT
NEW YORK (Reuters) - Lower stock prices and the end of the quarterly earnings reports season saw executives snap up shares of their companies in August, resulting in the second highest month for insider purchases in two years, a report Friday showed.
Executives bought $171 million of their own companies' stock during August, a 76 percent increase from July's $97 million volume, according to the report by publisher Thomson Financial.
An increase in buying had been expected as the second-quarter earnings season drew to a close because executives were more able to buy shares in their own companies.
"We do normally see a little bit of a bump-up in the buying and selling activity (in August) because we're coming off the end of the Q2 reporting season, so you do have a lot of companies lightening up on restrictions on their insiders' trading," said Kevin Schwenger, research analyst at Thomson Financial.
"Also, the market had come down a little bit, so there's perhaps been a few more bargain-hunting opportunities than maybe there were two or three months ago."
During August, the Nasdaq, Standard & Poor's 500 and the Dow Jones industrial average fell to lows for the year as record oil prices and disappointing earnings hit shares.
Over the month as a whole, the Dow rose 0.33 percent and the Standard & Poor's 500 was up 0.23 percent, reversing declines both indexes made the previous month. The Nasdaq shed 2.61 percent, falling for the second month in a row.
Meanwhile, the amount of stock insiders sold also increased, according to Thomson.
Corporate insiders sold $3 billion in stock, a 71 percent increase from July's $1.8 billion volume.
The month's dollar sell-buy ratio, a measure of executive sentiment, was a neutral $17.13, compared with $18.11 in July. On the scale, a higher reading indicates increased selling and decreased buying. A reading of below $12 is seen as bullish, while above $20 is viewed as bearish. Between $12 and $20 is viewed as neutral.
The neutrality of the reading indicated that corporate executives were "somewhat directionless, mirroring the general market of late," said Thomson.
Executives of large-capitalization companies participated more strongly in August than in any other month in the past year, said Thomson. This included John Stumpf, executive vice president of community banking at Wells Fargo & Co. (WFC: Research, Estimates), the No. 5 U.S. bank, buying 30,000 shares in the company.
The amount of buying and selling may decline in September as companies once again gear up for the third-quarter earnings season, which begins in earnest in October.
Over the past decade, Thomson said it had witnessed a month-over-month decline in selling from August to September each and every year. Buying declined in all but the years 1996 and 2001
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