Key Lessons from Corporate Insiders’ Trades
When the stock market is soaring and the usual ways of evaluating stocks don’t seem to be cutting it, it might be time to take a cue from the insiders. These are the bigwigs at companies who might just know more about what’s going on than anyone else. Ben Silverman, a research director at Verity, points out that tracking the buying and selling activities of these corporate insiders can offer crucial insight into potential investment opportunities.
Now, let’s get one thing straight – trading on confidential company info is a big no-no. Just ask Martha Stewart. But not all insider trading is illegal. In fact, some insider transactions can predict higher-than-average returns on a stock. That’s why it’s worth understanding how to use insider trading data to your advantage when choosing which stocks to invest in.
Insiders are usually only allowed to buy or sell stock during specific periods throughout the year. These periods typically start and end around major company announcements. The transactions made during these times are reported to the Securities and Exchange Commission and are publicly available. But according to Silverman, not all insider trades are significant. Individual transactions that stand out from the norm, like those that aren’t part of a regular pattern, can be more telling when it comes to potential stock performance.
When insiders start buying up shares of their own company outside of a scheduled plan, it’s often a sign that they believe the stock is undervalued and has room to grow. Adam Bergman, from Davenport Insider Buying, explains that when big insider purchases align with the company’s overall quality, it can be a promising sign for investors. On the other hand, insider selling might not always be as telling, as executives often have legitimate reasons for cashing out some stock.
If you want to dig into insider trading info on your own, there are plenty of tools available to help simplify the process. For example, Fidelity allows clients to screen for stocks with more insider buying than selling. FinViz.com provides insights into insider sentiment based on changes in insider ownership. And CapEdge.com offers a breakdown of the biggest insider transactions and whether they were part of an automatic plan or within the company’s approved trading window.
Looking ahead to possible stock picks for 2025, industry experts have their eyes on a few companies that insiders seem optimistic about. For example, Jefferies Financial Group (JEF) has caught the attention of insiders, with a significant increase in shares bought by Sumitomo Mitsui Financial Group. Marvell Technology (MRVL) is also on the radar, with multiple insiders recently purchasing shares of this chip and computer equipment firm.
So, if you’re considering your next investment move, taking a peek at what corporate insiders are up to could give you some valuable insights into where the smart money is flowing.
