Insiders buy and sell stocks of the companies they own or manage for various reasons.
Investors can take signals from these transactions, and can extrapolate sentiment based on what they see insiders doing. After all, when insiders are putting their money where their mouths are, it can make it easier to believe the story they’re telling about a particular company.
In this context, right now, I think looking at insider purchases of stock might tell a better story than the divestiture of one’s holdings in a given company, or the sale of stock options right now. Most investors are well aware of the valuations stocks are trading at now relative to their historical levels.
When insiders are buying during these times of heightened valuations, I think investors can get much more bullish on that particular company than read too much into stock option sales right now. If anything, I’d be a seller of stock options right now – doubling up on a stock I’m highly concentrated in, however, is a much more bullish indicator.
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.
