Stock Strategy of Insider Buying
Credit: wealthlift.comWhen you invest in stocks in the stock market, do you ever pay attention to when the insiders are buying? Do you pay attention to how many shares of the company insiders, such as the CEO and CFO own? If you don't, you should. While it is perhaps not the most important thing you should look for when buying stock in a company, it is very important!
Paying attention to when insiders in a company are buying or selling stock is important, and you can make a lot of money trading stocks this way. Simply put, *When Insiders are Buying, they think the Price of the Stock Will Increase* When insiders are selling, however, there could be multiple reasons for it.
This is all legal information available to investors. If you trade stocks on the brokerage firm Etrade, for example, there is a tab you can click that shows the most recent insider transactions.
Personally, I am about 90 percent invested in the gold and silver mining sector. I follow the website CanadianInsider.com to stay up to date with all the companies I own, to see when the insiders are buying. It's a strategy I've used that has paid off big time. I've listed below examples of how you could have made money by buying when the insiders bought!
*Those x's to the left represent when insiders bought shares.
The CEO himself bought a big chunk of shares in May. The share price rose nearly 50 percent afterwards!
(The CEO purchased 180,000 shares).
Example 2: Another example is from gold company called Brigus Gold (BRD). Brigus insiders started to accumulate shares back in April, when the share price was depressed at .75 cents.
The stock has since risen to $1! If you bought with the insiders you would have made money!
(Click the chart to the left for a better idea of when insiders bought, and a view of the current share price).
Example 3: Another example of insider buying is from a gold mining company called Primero Mining (Quote: PPP). Primero Mining insiders, including the CEO, when on a shopping spree starting about 4 months ago. What happened next was a big move upwards in the share price, as it went from $2.40 to over $5 a share! A 100 percent gain in just 4 months.
ExaCredit: CanadianInsider.commple 4: This is perhaps the best example listed. Pilot Gold (PLG) insiders started buying in July. Almost everyone within the company was buying shares. Did they know something that us outsiders didn't?
Perhaps they did, because what happened next was very positive news from their drill results. The stock went from $1 to over $1.70, for a solid 70 percent gain! Not bad for just 5 months!
If you put down just $2,000 you would have made $1,400 - not too shabby.
You might also be bearish on a stock and then see insiders of the company have been selling, which would make you more comfortable with not buying that stock. For example, the biggest company in the world, Apple, has seen insider selling of recent. While it doesn't exactly indicate that we can expect the share price to fall, it is not exactly a good sign.Credit: Etrade.com
Insider buying shouldn't be the only thing you consider when purchasing shares of a company. You should obviously also consider how strong the company is (their fundamentals), the management, their assets and liabilities, etc.
What insider buying tells you, however, is that they think the share price will increase! It may, or it may not. But I always will feel a little bit more comfortable buying with the insiders.
Full Disclosure: I own shares of all of the companies mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article. I am not an investment advisor. Please do your own due dilligence when investing!