Seasoned investors often track purchases and sales of a company's stock by insiders. The Direxion All Cap Insider Sentiment Shares (NYSE: KNOW) is an exchange traded fund that puts everyday investors firmly in the insider sentiment arena.
KNOW turns seven years old later this year and tracks the Sabrient Multi-Cap Insider/Analyst Quant-weighted Index.
KNOW is up just 3 percent year-to-date, but the insider sentiment ETF has recently been showing signs of life. The fund is up about 6.5 percent over the past 90 days. KNOW's underlying index consists of 100 stocks from the S&P 1500 Index.
“The index reflects positive sentiment among those 'insiders' closest to a company’s financials and business prospects, such as top management, directors, large institutional holders and the Wall Street research analysts who follow the company,” according to Direxion.
Why It's Important
KNOW components are reviewed monthly for favorable insider buying trends and analyst ratings. The Direxion fund can be used as a complement to traditional broad market, cap-weighted index funds and ETFs because KNOW's sector weights often significantly differ from those of the Russell 1000 Index or the S&P 500.
For example, KNOW's current technology weight is about one-third of that of the S&P 500's. The consumer discretionary, financial services and energy sectors combine for 61 percent of KNOW's weight. Those groups combine for just over a third of the S&P 500. None of KNOW's components account for more than 2.66 percent of the fund's weight.
“This insider sentiment selection strategy uses a screening methodology based on public-company filings and positive earnings analysis that provides the basis for the fund’s quantitatively weighted index,” according to Direxion.
On a technical basis, KNOW resides just 2.53 percent below its 52-week high, and a move above $43 could represent a significant upside breakout.
Additionally, some data points suggest investors are warming to the fund. On Aug. 7, KNOW saw inflows of $42.64 million, the leading total for that day among all Direxion ETFs, according to issuer data.
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