Insiders cash out via IPOs as investor optimism becomes excessive, NDR says
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- Insiders are taking advantage of “excessive optimism” among investors and cashing out via IPOs and secondary offerings, according to a note from Ned Davis Research.
- A survey by the National Association of Active Investment Managers has been above 100% for five straight weeks, NDR observed, showing signs of record optimism from active investors.
- The high optimism is prevalent as IPO and secondary stock offerings hit $150 billion over the past 13 weeks, according to NDR.
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Company insiders are taking advantage of “excessive optimism” among investors and cashing out via IPOs and secondary offerings, according to a note from Ned Davis Research.
A survey conducted by the National Association of Active Investment Managers has registered above 100% invested for five weeks in a row. The survey suggests that optimism is high and active managers are fully invested.
“This is not only a record, it has also been in a zone where the market has historically made little progress,” Ned Davis of Ned Davis Research said.
That survey is not the only indication of upbeat investor attitudes towards stocks. Short-term and medium-term sentiment indicators are also heightened, according to the NDR Daily Trading Sentiment Composite and Crowd Sentiment Poll.
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But a sell signal from the sentiment indicators has not yet occurred, NDR explained, adding that the Bulls/Bears sentiment indicator must reverse from its highs and fall below 67%. The sentiment indicator is currently hovering above 70% with no clear indication it is due for a turn lower.
Regardless, company insiders are taking advantage of the heightened investor enthusiasm and record high stock prices by going public or launching secondary offerings.
Very heavy selling of stock has occurred over the past few months, with nearly $150 billion in sales via IPOs and secondary offerings over the past 13 weeks.
“While all these groups, with not great records, are investing heavily on the upside, the often smart money insiders are doing the opposite,” Davis said.
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