The Dow broke 10,000 on Oct. 14, but insiders have been signaling a stock market pullback. Since Sept. 1 directors and executives at publicly traded U.S. companies have sold $40 worth of shares for every $1 of purchases. That compares with $22 in sales for every $1 buy from March through August. Insider selling hasn't been this high since the downturn began at the end of 2007, according to TrimTabs Investment Research. "We've never seen a market bottom when there weren't significant levels of insider buys, and we've never seen a top without significant selling," says TrimTabs CEO Charles Biderman.
Activity by S&P 500 executives was particularly pessimistic in the third quarter, notes InsiderScore, as insiders sold almost $63 in stock for every $1 purchased. CEOs of all public companies unloaded $1.7 billion in company stock vs. about $95 million acquired, including Cisco Systems (CSCO) CEO John Chambers' $9 million sale in August. InsiderScore data also show that sentiment is especially negative at industrial goods, service, and technology companies.
Banking on Australia
While the rest of the Group of Twenty countries may be stuck in a slump, the economy is perking up Down Under. Australia's central bank unexpectedly raised its short-term interest rate target by a quarter-point on Oct. 6, to 3.25%, after economic data showed the risk of "serious economic contraction" had passed. The Australian dollar also hit a 14-month high against the U.S. dollar. Australia's economy is puny compared with those of its G-20 brethren, but it has close ties to Asia—China is a key consumer of Australia's iron ore, copper, and other minerals.
That's why Kevin Shacknofsky, manager of the $600 million Alpine Dynamic Dividend Fund (ADVDX), owns the stocks of Australian commodities producers such as iron ore powerhouses BHP Billiton and Rio Tinto. "Australia also has one of the world's strongest financial systems," he adds, noting its limited exposure to subprime debt. Shacknofsky likes National Australia Bank and Westpac Banking Corp. One way for investors to play commodities as well as Australian banks is the iShares MSCI Australia Index exchange-traded fund (EWA), which has a 38% stake in financials and 35% in commodities producers like Rio Tinto. Although commodities are volatile, the fund's 4% dividend yield should help smooth the ride.
ConocoPhillips (COP) unveiled a new strat- egy on Oct. 7 aimed at improving shareholder returns, including an increased dividend payout and plans to reduce debt. Since then, the stock is up 5%, to 50.97.
The $75 billion energy company said that over the next two years it intends to unload $10 billion in assets that require a lot of cash to maintain. It also plans to reduce spending on machinery and other capital equipment in 2010. It will pay shareholders a 50 cents quarterly dividend Dec. 1. At 4%, its dividend yield is "the most generous" among U.S. oil and gas companies, notes independent research firm Collins Stewart, which expects shares to hit 60 by yearend 2010. This outlook is based on relatively strong crude oil prices: Collins Stewart thinks prices will average out to $80 per barrel in the long run. In the third quarter, crude oil averaged $68 per barrel.