With the coronavirus not yet in our rearview mirror, there continues to be a high level of uncertainty among many in financial markets, with respect to the direction the stock market may head in the near term. For those with serious concerns about heightened valuations who are considering taking some profit off the table, I’d recommend watching for insider selling of the companies one is invested in.
Large transactions involving the sale of company stock by a group of insiders at once can somewhat be indicative of a sentiment shift at the management level of a given company. This can be a bearish signal for investors. Those with preconceived worries about the future outlook of any company should take such transactions as a warning and consider reallocating one’s position, should one be inclined.
That being said, insider transaction information is often only a signal and can sometimes be wrong. Speaking with a certified financial advisor is a great way to validate one’s concerns.
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.
