Insider Stocks Buying

Insider Stocks Buying
Published Date: 2008-07-09 16:27:34 WorkOnInternet.com

The advent of the Internet has provided easier access to a valuable source of information insider buying and selling. Combining the activity of company officials with the point and figure chart can give you an extra edge in the analysis of that issue.

Insiders are no different from anyone else. They buy stock in their company because they believe it will move higher in price, not lower. Insiders are not right all the time, but they are as close to the company as you can get. If the company is having a difficult time fundamentally, stockholders within the company are the most likely to know it and will not buy the stock. Whether someone is an insider or not, the motivation to buy the stock is the same - a desire to see its value increase.

Therefore, take note when insiders buy. Often they are early, but if you find a stock with high insider buying, then people very close to the company believe strongly in it and have cast their votes in favor of the company with their own money. That is the most powerful fundamentalist vote around.

Also, look for more than just one buyer. One insider might be new to the company or just misinformed, but a larger number of insiders are not as likely to be. Insider selling is a different matter. There are many reasons insiders might choose to sell stock, and it might have nothing to do with their outlook for the company. They might need to diversify their portfolio or maybe they are buying a new house. Don�t be overly concerned if an insider sells. However, a large number of insiders selling stock is worthy of concern. When they are all jumping ship and the chart suggests supply is in control, you do not want to be the one going down with the ship.

Use the insider activity as an additional criterion to help make your investment decisions. Finding the insider activity on a stock is easy, especially with the sources now available on the Internet. We can pull up a P&F chart and be within two clicks of a summary of what firms like the stock on a fundamental basis as well as any recent insider activity. If you find a company that the analyst believes is fundamentally sound, and the insiders have agreed by buying stock, then watch for the point and figure chart to confirm that demand is in control, indicating a time to buy.

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