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Sabrient Insider Sentiment Index
The Sabrient Insider Sentiment Index (SBRIN) was designed to help markets incorporate significant insider information into stock valuation. Corporate insiders and Wall Street analysts who follow a company have the most intimate knowledge of the company's likely future prospects; insider buying and rising analysts’ earnings estimates are reliable signals of a company’s future growth prospects.
This all-cap Index is licensed to Guggenheim and tracked by the Guggenheim Insider Sentiment ETF (NFO), which is rated 2 STARS by Morningstar. (Source: Morningstar.com, as of 5/31/16).
(This index is available for sector-specific and mid-cap or small-cap licensing.)
The Sabrient Insider Sentiment Index (SBRIN) is designed to identify companies with potentially superior risk-return profiles that also are (1) reflecting favorable corporate insider buying trends (determined via the public filings of such corporate insiders) and/or (2) have recent earnings estimate increases published by Wall Street analysts. It is possible for a company to be included in the Index based on one of these factors alone, if it scores high enough on that factor.
These two groups—corporate insiders and analysts who follow the company— have the most intimate knowledge of the company's likely future prospects. When corporate insiders buy their company’s shares on the open market or when analysts raise their estimates of the company’s future earnings, this is a reliable signal of a company’s future growth prospects.
The Sabrient Insider Sentiment Index was created to help markets incorporate significant insider information into stock valuation. This is done by using a factor-based analysis in order to create a portfolio that best extracts and confirms available insider information. The resultant 100-stock portfolio has historically had a risk profile similar to the market while providing a 10% average differential return per year vs. the benchmark (Russell 3000 Index). Sector and industry concentrations are controlled to avoid some idiosyncratic risk, and turnover is limited to 25% per quarter.
- Potential Index constituents include all equities trading on major U.S. exchanges.
- The Insider Sentiment Index is comprised of the 100 highest-ranking securities chosen from a subset of companies covered by more than one analyst.
- Each company is ranked using a 100% quantitative rules-based methodology that includes composite scoring of a handful of specially-targeted factors, including (a) number of insider purchasers and percentage increase in the holdings of the purchaser and (b) number of positive analyst revisions and the percentage increase in analyst expectations.
- Companies are then sorted from highest to lowest, based on the composite score.
- The 100 highest-ranking securities are chosen and given an equal weighting in the portfolio.
- The constituent selection process and portfolio rebalance is repeated once per quarter.