Record insider selling in energy, thin buying in finance: signals for investors

The refiners Par Pacific and PBF Energy have seen their stock climb 149% and 210% this year, prompting their executives to sell shares. In the financial sector, the number of executives who bought shares in their own companies dropped to its lowest level in almost 23 years.

Despite being public, insider trades are a coarse signal. Ben Silverman, VerityData's research head, states this data is better suited to analyzing individual firms rather than broad sectors.

Why is insider selling at refineries at record levels?

VerityData benchmarks the ratio of selling insiders to buying insiders, where 1.0 represents a sector's historical standard. The energy industry sits at about 1.4 times this norm, ranking second only to another sector, versus a market-wide average of 1.2.

Wall Street Journal columnist Spencer Jakab notes that Par Pacific and PBF, both smaller independent refiners, are trading at record peaks. PBF posted adjusted second-quarter earnings of $6.22 per share, reversing a loss from the same quarter the year before.

The effective refinery price for diesel exceeded $200 a barrel last week, according to Jakab. Following this, the Group of Seven countries decided to release 100 million barrels from strategic reserves, a move that includes diesel supplies.

Jakab is skeptical that diesel pricing is sustainable. He argues that executives who have spent decades in the refining industry have a keener sense of the ceiling than the average investor.

Still, Jakab cautions that insiders might misjudge the market sentiment towards their own industry.

Should weak insider buying at financial firms alarm investors?

The financial sector leads the VerityData chart, registering roughly 2.1 times its baseline. VerityData determined this was not due to increased selling, but driven by reduced buying activity.

Goldman Sachs, Morgan Stanley, and JPMorgan Chase are set to report next week while Treasury yields sit above 5%. Jakab points out that per-share profits at each of these banks are roughly quadruple what they were a decade ago.

Jakab nonetheless points to tensions in the private credit market, stressed consumers, and record levels of borrowing by artificial intelligence companies.

Consumer staples firms occupy the bottom of the chart, at roughly half their historical average. Insiders at Altria, Tyson Foods, and energy drink maker Celsius Holdings have made recent share purchases.

Public SEC Form 4 filings, which record insider transactions, are accessible to investors, such as the Nvidia insider selling filing. With the Nasdaq at an all-time high, these numbers could indicate the degree to which executives back present valuations.