What is interesting about analyzing stock transactions of insiders of various companies or sectors is the attempt made by many analysts to determine whether a given transaction was made with purpose, or the intent to preempt any unforeseen non-public catalyst which would take a given stock higher or lower in the near term.
What many analysts agree, however, is that insider buying transactions generally meaning more than the sale of stock. Executives can choose to exercise stock options for a range of reasons, ie buying a second yacht. However, investing one's hard-earned money into any company, never mind the one you work for, requires a heightened conviction for that trade.
I tend to pay particularly close attention to the number of transactions made by insiders over a specific timeframe. If a senior executive is loading up in large amounts of stock, and engages in multiple purchases over a span of time, I will generally assess a much more favourable weighting to that stock than I otherwise might.
As always, please remember to consult with a certified financial planner and do your own research before making investing decisions. Insider buying or selling activity is not necessarily indicative of the future performance of a given company’s stock price.
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 glean pertinent information to assist in investment decision-making.
Invest wisely, my friends.
