Gold stocks have produced dull returns in recent months, but that has not stopped those securities from glittering in the eyes of corporate insiders.
In fact, precious metals have now eclipsed industrial metals as the stock group on the TSX with the highest insider buying sentiment, according to INK Research, which tracks the buying and selling activity by executives and directors within their own businesses.
INK's precious metals and minerals indicator is now at 389 per cent, up from 321 per cent in mid-December. A reading of 400 per cent would signify there are four stocks with key insider buying for every one with selling. The specialty mining and metals indicator, which tends to be industrial-focused stocks, is sitting at 278 per cent.
INK Research CEO Ted Dixon said the improving sentiment for precious metals stocks may be driven in part by insiders hunting for value; given that the precious metals and minerals index dropped 4 per cent over the past two months at a time the S&P TSX diversified metals and mining index advanced 12 per cent.
Also, gold company insiders may be gaining more confidence given signals that Japan will embark on aggressive monetary easing with its new prime minister, Shinzo Abe, in charge. The Japanese Finance Ministry announced earlier this month that it would be buying euro zone bailout debt, helping to devalue the yen. Continued Asian purchases of European and U.S. debt will help keep bond yields in developed markets low, making sovereign debt less attractive relative to gold.
Among stocks, Barrick Gold Corp. is seeing the most insider buying by value, with $5.930-million in net purchases over the past 60 days, INK Research data show.
Overall, the INK sentiment indicator for TSX-listed stocks stands at 136.6 per cent this week and has been relatively steady in recent weeks. A reading of 100 per cent means an equal number of stocks with buyers as sellers.
The indicators are derived by taking the number of stocks with buy-only transactions over the last 60 days, and dividing that with the number of sell-only transactions. The indicators ignore stocks that have both buying and selling in an effort to give a more accurate reading.