Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Weekly SPX & Gold Price Cycle Report - 17th Oct 19
What Makes United Markets Capital Different From Other Online Brokers? - 17th Oct 19
Stock Market Dow Long-term Trend Analysis - 16th Oct 19
This Is Not a Money Printing Press - 16th Oct 19
Online Casino Operator LeoVegas is Optimistic about the Future - 16th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - Video - 16th Oct 19
$100 Silver Has Come And Gone - 16th Oct 19
Stock Market Roll Over Risk to New highs in S&P 500 - 16th Oct 19
10 Best Trading Schools and Courses for Students - 16th Oct 19
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

How to Profit from Insider Stock Transactions

InvestorEducation / Learning to Invest May 13, 2013 - 10:46 AM GMT

By: DailyGainsLetter

InvestorEducation

Moe Zulfiqar writes: If an executive of a publicly traded company buys or sells shares of their own firm, should this be taken as a signal by investors about what might happen to the stock prices? This question has taken center stage these days, as the markets are reaching new highs on a regular basis and insiders—those who hold some of the key positions in a company—are selling their shares.


According to TrimTabs Investment Research, in February, executives of companies sold $35.30 worth of shares in their own companies for every $1.00 worth of shares they bought. As the firm noted, this was the highest amount since it started tracking insider transactions in 2004. (Source: Taylor, C., “U.S. insider stock sales send up red flag for investors,” Reuters, April 11, 2013.) They were most bearish.

When an executive of a company purchases or sells shares of the company they work for, it is called an “insider transaction.” Insider transactions can happen for many reasons; for example, insiders may sell shares because they might have accumulated a significant number of shares over the tenure of their work and want to liquidate to pay for expenses.

That said, should investors follow insiders at all? The above is true, but investors need to keep this in mind: insiders of a company are usually the first ones to see what will happen to the company in the upcoming future. They find out certain details before investors hear about them.

Now comes the question: how does one actually profit from this? Information about insider transactions is publicly available, but for investors, it may just become a hassle to follow it on a regular basis and keep up-to-date.

One way investors can profit from insider transactions may include the Direxion All Cap Insider Sentiment Shares (NYSEArca/KNOW) exchange-traded fund (ETF).

This ETF provides investors with the ability to invest in companies whose insiders are accumulating the shares of the firms they work for. In addition, it also screens for companies that are fundamentally strong and have earnings growth. (Source: Direxion web site, last accessed May 9, 2013.)

If an investor goes it alone, looking for individual companies and tracking insider transactions, they have to be very careful. To become better at doing this, they might want to look at companies where insiders are accumulating shares and buying continuously. This hints that they believe in the firm and are willing to put money on it.

Instead of looking at insider transactions in a big-cap company, investors may want to screen companies that are small. The reasoning behind this is very simple: in a small firm, the word may get around quickly, and the insiders might have more responsibility and a better gauge at what can happen next.

Tracking insider transactions and acting upon them can be a profitable strategy, but investors still need to keep their long-term focus in mind. Instead of just buying the shares of a company that the insiders are buying, investors should also prepare for the worst. They need to minimize their risk on an ongoing basis and make sure they don’t overexpose their portfolio to just one stock in hopes of making huge gains.

Source: http://www.dailygainsletter.com/stock-market/how-to-profit-from-insider-transactions/855/

Copyright © 2013 Daily Gains Letter – All Rights Reserved

Bio: The Daily Gains Letter provides independent and unbiased research. Our goal at the Daily Gains Letter is to provide our readership with personal wealth guidance, money management and investment strategies to help our readers make more money from their investments.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules