Insider sales in U.S. not a sell signal this time

By Edward Krudy

NEW YORK (Reuters) - U.S. corporate bosses are likely to sell more of their companies' stock through the end of the year, but that does not mean stock prices have topped.

Insider selling recently hit its highest level in more than a year. Conventional wisdom says it's time to sell when corporate leaders start cashing in on gains as it signals a lack of confidence with the corporate outlook, but in the wake of the 50 percent decline, that expectation may be incorrect.

Executives have sold personal holdings in the last few months for other reasons, analysts say, including cash-flow problems following the wipeout in equities, tighter credit conditions and a desire for greater diversification.

"Under the circumstances you need to be a little bit skeptical of the numbers," said Scott Marcouiller, senior equity market strategist at Wells Fargo Advisors in St. Louis. "These guys took some major hits."

Insiders sold $6.2 billion worth of shares in August, the most since May 2008, while insider buying has been under $1 billion for seven straight months for the first time since 2005, according to a report by research firm TrimTabs.

Because insiders cannot trade around earnings season, insider volume at $3.6 billion in October was about half that in August, but the actions of executives at many companies that have reported suggest selling will pick up.

A Goldman Sachs finance executive sold $3 million in shares shortly after the company posted better-than-expected third quarter results in October

Tupperware Brands Corp's chief executive, Rick Goings, along with five other insiders, sold $10 million worth of stock after the company beat third-quarter earnings estimates in mid-October.