When insiders sell stock there are a multitude of reasons, so it doesn’t necessarily indicate that there are problems ahead.  On the other hand, when insiders buy in mass quantities  there is only one reason why they would put their own cash into the company stock – they feel strongly that the stock is a good value at current levels and will rise in the future.  Nobody knows the company as well as insiders, particularly the CEO and CFO.  So, when they begin purchasing, it can often pay to follow their lead. 

That’s not to say that insiders always have great timing as illustrated by the large purchases made by General Growth Properties (GGP) CFO Freibaum Bernard beginning in May of this year.  Since pouring nearly 35 million into his company’s stock in May, he has taken a nearly 30% hit.  He has been averaging down ever since by picking up nearly 2 million worth of stock on June 8th and most recently another 8 million worth just yesterday.  Clearly, Freibaum isn’t a chart reader because if he had been he would have realized that when he picked up that 35 million worth of shares, GGP stock was breaking down right along with the entire REIT industry.  The good news for Mr. Bernard is that the stock is now hitting some fairly strong support around 45, but following his lead at this point is too risky.  Volume levels aren’t yet indicating that control has shifted from sellers to buyers en masse.

Real Time Insider Buying Data Provided By Insider Cow