Every week, I check to see what corporate investors are doing with the shares of the companies they own.
I do not get too excited over small-to-mid-size insider sales. Crowing over a single insider sale is something so-called analysts and experts do far too often. But there are hundreds of reasons a corporate officer or director may sell some shares of stock.
But there’s only one reason insiders buy shares. And that’s exactly what happened, big-time, in this little gem of a stock…
Or perhaps they are a bit younger than others but realize an extraordinary opportunity developing in banks and real estate investment trusts. To take advantage of the opportunity, they sell off a few thousand shares of the ice cream, brake pads, and roofing shingle conglomerate where they are the head of sales.
Or it could be the CEO selling stock to buy a long-coveted vacation home vacation home, or the CFO paying for a dream wedding for a favorite daughter. Or the lead outside director may be going through a nasty divorce and must sell stock to pay off the soon-to-be ex.
For the most part, I ignore moderate insider selling most of the time, as there is little-to-no informational value in the sale.
There may be more information in much larger sales, but you have to do some digging to find out the reason for the sale.
On the flip side, there is only one reason executives open the proverbial checkbook and buy stock in the open market: they think the stock is going higher—a lot higher.
They are not buying stock to collect a few percentage points. They already have stock incentives and option grants. They are doing this because they will make money if the stock goes up. They have a strong conviction that the stock is undervalued and will go much higher, and they want to own more than they have.
Again, they are not…
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