Back in the heady days of August, it appeared that US stocks could only rise. Charged by another surge in trillion-dollar technology names, the S&P 500 Index finished the month up 7 per cent. For context, that was also 56.5 per cent ahead of March’s lows.
However, director dealing during the period suggests executives were either less optimistic the rally could continue, or believed equity prices were disconnecting from economic and business fundamentals.
A total of 1,042 chief executives, chief financial officers or company directors of firms with a market capitalisation of at least $1bn (£0.77bn) made share disposals of at least $10,000 in the month, according to regulatory filings collated by data provider Smart Insider. As well as being the most frequent period for director selling in two years, the dollar value of those combined sales came to $6.76bn, which is the highest monthly figure since November 2015.
The two largest disposals in the period came from brothers Steven and Mitchell Rales, co-founders of Danaher (NYSE:DHR) manufacturing conglomerate. Together, the pair dumped almost $1bn-worth of shares in Fortive Group (NYSE:FTV), an industrial technology firm spun out of Danaher in 2016.
Shares worth $127m were also sold by Royal Caribbean Cruises (NYSE:RCL) director Arne Alexander Wilhelmsen, whose late father Arne Wilhelmsen co-founded the group. Despite having its cruises suspended until at least October, RCL’s shares have more than tripled from a March low.
The data also makes a good case for following director buy signals in times of crisis. Though most executives acquire their shares through remuneration packages and long-term incentive plans, a record 2,670 insiders made direct stock purchases worth a combined $1.3bn in March, when markets were tanking.
The timing of those purchases, and the requirements for directors to hold profitable stock for at least six months, means many more executives could soon be banking profits from the subsequent rally.
