A positive for market - corporate insiders buying

August Busch III, an AT&T Inc. board member since 1980, bought $2.27 million in shares in the phone company last month, his largest purchase ever.

Meanwhile, Monsanto Co. director William Parfet added to his holdings in the world's largest seed producer for the first time in eight years.

The two purchases reflect a recent trend: Chief executive officers, directors, and other senior officials in corporate America are buying more of their companies' shares than they are selling for the first time since 1995. This trend prompts confidence in some market watchers that the stock market is poised for a rally.

The last seven times insiders bought more than they sold - between 1988 and 1995 - the Standard & Poor's 500 index rallied an average of 21 percent in the following 12 months, according to data compiled by the Washington Service, a Bethesda, Md., research firm that tracks insider data for more than 500 clients, mostly institutions.

The purchases now show that executives believe the worst may be over after stocks suffered their biggest January drop in 18 years on signs the economy could be in a recession.

"If it's so bad, how come these guys are gobbling up their own companies' stock? That's the telltale indicator," said Fritz Meyer, a senior market strategist at AIM Advisors Inc.

"Companies are in the best possible position to assess the economic outlook," he said.

Purchases by officers, directors, and other senior managers of the 1,911 companies on the New York Stock Exchange reached $683 million in January, according to Securities and Exchange Commission filings compiled by the Washington Service.

Total January purchases were 44 percent more than sales, the first time in 13 years that insiders became net buyers, the data showed.

The S&P 500, the benchmark for U.S. equities, has never fallen in the 12 months after insiders bought more than they sold, according to Washington Service data that go back 20 years.

However, executives and directors may be underestimating the effect of the nation's economic slowdown on earnings, said Robin Hepworth, of Allchurches Investment Management Services.

Fourth-quarter profits dropped an average of 25 percent for the 289 members of the S&P 500 that have reported so far, data compiled by Bloomberg News indicate.

That has led to an increase in short-selling - a bet that stock prices will drop. The amount of short-selling - when traders sell borrowed shares expecting to buy them back after prices fall - grew to 3.7 percent of the total shares on the NYSE last month, the highest since at least 1931.

Insiders "are being very brave," said Hepworth, a London-based manager at Allchurches. "Against the backdrop of everything going on, this is one positive."

Insiders have been buying stock in five of the 10 industries tracked by Washington Service: telecommunications, industrials, consumer discretionary, energy and materials.

Busch, a former chairman and chief executive of Anheuser-Busch Cos. Inc., the St. Louis maker of Budweiser beer, bought 63,000 shares of AT&T at $36.10 a share on Jan. 25, his largest amount since at least 2002, according to SEC filings. The stock has risen 6 percent since the purchase, after plummeting 13 percent from the start of the year.

At Monsanto, Parfet bought 10,000 shares for nearly $1 million on Jan. 17, right after the stock had plunged 22 percent in three days. Monsanto has jumped 15 percent since then.

Parfet and Busch did not respond to phone messages seeking comment.