Like many things in life, there are various types of insider selling. Insiders sell stock they own in companies all the time, and investors can often make mistakes with how stock sales by executives are interested.
Making sure to track insider transactions is certainly a good idea, for positions one has or for companies one is considering a position in. But treating these transactions like Gospel could dissuade an investor from making an otherwise solid investment.
I think the important thing most investors should do is attempt to discern whether or not a pattern has emerged among more than one executive, or over a long period of time in general, for a given company.
Taking a look at the basic valuation metrics of said company should also provide a baseline from which to make an assessment. If you’re wondering if insiders are selling because the valuation looks a bit rich, there’s a good chance you’ve answered your own question, making any insider transactions irrelevant.
As with any investment, make sure to consult a financial advisor before making any investment decisions and do your research before investing your hard-earned money into any company.
Investors should never make an investment decision on insider trading alone, but rather should consider all fundamental long-term drivers of the business and its historical performance before making such decisions.
Insider buying or selling is not necessarily indicative of anything - insiders make such transactions all the time for purposes completely unrelated to the performance of the company.
Invest wisely, my friends.
