Insider Stock Trading - How to Interpret the Secret Information Revealed by Insider
I do not only monitor the insider stock trading of the stocks in my portfolio to be informed about the
latest insider transactions, but I also use the insider stock trading data as a source of information to find
new company's which I could potentially add to my stock portfolio.
It is important to always think twice before adding a company to your portfolio if insiders are selling the
company's stock. Conversely, I like to see insiders buying more stock for their personal holdings if the company
has been determined as undervalued according to my standards.
As you can imagine, insiders of a company know more about that company than shareholders who rely on publicly
disclosed information. Because insiders are the first to become aware of sensitive information I always
follow their actions - not their words.
Peter Lynch, one of the most successful traders of all time, once said: "Insiders might
sell their shares for any number of reasons, but they buy them for only one: they think the price will
Always interpret the insider transactions in conjunction with the insider's total holdings in a specific
stock, i.e. what percentage of the insider holdings in a specific stock did he or she buy or
sell? I find it very revealing to make it clear how many shares an individual insider has acquired or disposed
in a certain period1 and at which prices these transactions were settled.
The best secret information is revealed when two or more members of the management team are buying or
selling a stock at the same time and in significant numbers. As a result, substantial insider buying by two or more
insiders is considered as a bullish signal, and substantial insider sales by two or more insiders is
considered as a bearish signal.
I have created the following subpages for the insider stock trading section:
Which Exclusive Type of Stock Owners Are Your Fellow Shareholders.I divide your fellow shareholders into 3 well defined insider stock ownership groups and
explain how I use this subdivision in the due diligence process of my stock investment
5 Free Resources to Find Your Stock's Current Shareholders.I
reveal 5 free resources to conduct your company ownership search, which all reveal different
insights into the stock holdings of the various ownership groups.
When do Insiders Need to Report Their (Change in) Stock Ownership.Canadian and American regulators have both set different insider trading rules as to when
insiders need to report their initial filings and change in stock ownership. Read about it
3 Free Resources for Tracking the Change in Canadian Insider
Ownership.This article: "Insider Trading Canada" reveals the 3 best resources to find
detailed information about the change in insider ownership of a specific Canadian listed
3 Free Resources for Tracking the Change in American Insider Ownership.This article: "Insider Trading USA" reveals the 3 best resources to find detailed information
about the change in insider ownership of a specific American listed company.
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Note: I recommend you to interpret
the insider stock trading only as part of a company's due diligence as a whole. Thus, don't buy shares in a company
just because two or more insiders are buying substantial amounts of stock and vice versa.
Note: Sometimes you will see insiders sell their shares which they have
just acquired with the exercise of their stock options. Although this might result in substantial insider selling by two or more
insiders, I do not implement this type of insider stock trading as a bearish signal, as they need to cover the
income taxes payable on the share exercise.
What Type of Content Can You Expect to Find on UndervaluedEquity.com
Today's News Related to the Global Energy and Mining
Stocks.On this page a RSS feed is displayed with stock market news related to
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How I Conduct My Stock's Due Diligence Investigation Process.If
you want to know what I learned while I was conducting my due diligence, I recommend you to read
all the chapters of the investigation process.
Are These the Best Stocks to Buy Today.In my stock watchlist you
find stocks who offer great potential, but at the time I analysed these stocks they didn't comply
with all my guidelines from my due diligence chapters.
Jeroen Snoeks is the founder of UndervaluedEquity.com, a website for
investors passionate about investing in undervalued stocks. ThroughUndervaluedEquity.com, he shares his
experience and knowledge and will soon reveal his personal stock portfolio.