Insider Buying and Selling
Insider buying and selling purchase or sell based on public information using proper procedures. Reported publicly to maintain transparency in the markets, these trades are commonly taken by outside investors as indicators of a stock’s future price trends. Insider buying and selling can be a good indicator of whether a company will enter a bullish or bearish trend, since insiders have a very strong understanding of a company’s position and outlook in the market. It is commonly cited by expert traders as an important component in decisions to place trades on a company.
- When insiders start dumping their stock you should pay attention
- Corporate insiders sell company stock for a number of reasons
- They think the stock is overvalued (and want to take gains)
- They need the cash for normal life reasons
- They want to diversify
- Personal Stock Holdings = shares insiders purchased with their own money (vs granted shares/options)
- Insider Buying/Selling can be an indicator of whether to buy or sell a stock
- Also important and related is whether the company is buying back shares at a corporate level
- Corporate Buybacks + Insider Selling at the same time may indicated that management is trying to fill their own pockets at the detriment of shareholders