Insider buying is an interesting phenomenon to follow, for a few reasons. First, and most importantly, insiders are generally considered to be experts on the underlying business, with insight into various information and knowledge of future growth prospects and strategy that others in the investment community may only be able to speculate on.
When insiders buy, investors often take notice, for this key reason. Another important thing to keep in mind with respect to insider buying is the fact that executives are essentially doubling down on their own company- taking the salary they earn with said company and “giving it back” to the company, with the expectation it will grow, according to plan.
This is perhaps the greatest example of C-suite folks putting their money where their mouths are, adding credibility to what they are saying, and adding credence to their message for the investing public, which has to decide if these folks mean what they say.
In general, whenever I see insider buying in any significant manner for a given company, I look at this as a strong signal that the company’s management team is eating its own cooking, something I really like.
As always, insider buying or selling is not necessarily indicative of the direction a stock will move over a given time frame, so trade accordingly.
Please consult a financial advisor before making any investment decisions, and do your homework before pulling the trigger on any company. Invest wisely, my friends.
