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Can You Beat The Market Following Insider Buying?

Note: The difference between the average of all insider buys vs. the median return.  This suggests that well over half of the insiders performed better than the median of 14.95%. 

Our research shows unequivocally you can.  Over the last 12 months we tracked 421 insiders that bought $100,000 or more of their company’s stock.  We omitted from this 10% owners as we view them more like hedge funds than true insiders.  We dont’ look at numbers less than $100,000 because that can be window dressing, simply execs trying to pump up investor confidence.

The average return on these insider buys was 19.80%.  The median return was 14.95%.  The best return was 285.2% and the worst was -61.77%.  This is a volatile strategy though as the standard deviation was 37.72%.  During the same time period the S&P 500 Total Return was 9.85%.  Following insiders indeed can be a gratifying strategy.

 

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