For any investment, one of the key pieces of information investors should take into consideration are the transactions made by insiders. Insiders such as the company’s executive team or board of directors have direct knowledge of the forward-looking prospects of a given company, and greater visibility into what the future might hold for said company.
Buying or selling activity, particularly on a large scale or by a significant number of insiders, could signal that insiders believe a given stock price has a greater probability of going up or down over a given time frame.
However, I think right now, these transactions ought to be scrutinized more closely than ever. Given how overvalued the market is on a relative historical basis, insider selling could be explained away pretty easily.
Whether it’s for diversification purposes or other reasons, insiders have an inherent incentive to sell right now. Buying activity, however, could indicate extreme bullishness on the future prospects of a stock, and is something I’m keying in on more right now.
As always, please remember to consult with a certified financial advisor into your own homework before making investing decisions. Insider buying and selling activity is not necessarily indicative of the future performance of a given company’s stock price, and insiders regularly buy or sell positions in companies they own or manage for reasons other than expectations of future stock price performance.
Analyzing insider transactions in a given stock is one tool of many to gain pertinent information to assist in investment decision making.
Invest wisely, my friends.
