Action of Insiders

Nobody knows more about a company than its executives.  So, it’s very important to track their buying and selling habits to get a sense of how they feel about the company’s future prospects.

Insider Buying and Selling

  • Insider selling here and there is nothing to be alarmed about as there are many reasons why insiders sell their shares.  However, consistent selling by a large number of insiders is reason to be cautious.

  • Insider buying is much more positive than insider selling is negative.  Insiders aren’t are going to risk capital if they don’t think the price of the stock is going to rise.  Buying by several insiders in large quantities is a good indication that good news is around the corner.   In fact, their are trading strategies devoted to insider buying that do quite well.

Management Ownership

  • When management owns a significant portion of a company, they have a much greater vested interest in seeing the company succeed and ultimately, seeing the the price of the stock rise (this will depend on the size of the company)

  • Look for management ownership of 10% or more

Company Buybacks

  • The company buys back its own shares from the marketplace

  • This decreases the supply of shares and indicates that the company feels the stock is undervalued and often results in a rising stock price.

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