We’ve added a new feature to our blog/newsletter about insider buying. As you know, each week we analyze the most notable buys and try to understand what they see and share this knowledge with the readers. We don’t look at just any insider buys but ones we deem notable. A more detailed explanation of how we determine “notable” is described in detail below.
Just how good are these insights? Well now you can see for yourself. From here on out, each week and for all of June and May we included a dynamically updated spreadsheet that tracks these highlighted insider buys. As time permits, we will go back and add this table to more weeks. For example to compare any week’s buys, go to the bottom of the spreadsheet and select the week you want to analyze. For example the average insider buy returned 4.1% versus 1.4% for the same period S&P 500 return for the most current week, ending 6-19-20. The prior week, ending in 6-12-20, insiders returned 10.74% versus a -3.45% for the S&P 500.
Insiders sell stock for many reasons, but they generally buy for just one – to make money. You’ve always heard the best information is inside information. Everyone who has any experience at all in the stock market pays close attention to what insiders are doing. After all, who knows a business better than the people running it? Officers, directors, and 10% owners are required to inform the public through a Form 4 Filing any transaction, buy, sell, exercise, or any other with 48 hours of doing so. This info is available for free from the SEC’s Web site, Edgar, although we subscribe to SECForm4 as they provide a way to manage and make sense of the vast realms of data. I’ve tried a lot of vendors and SECForm4 is one of the most customer friendly and responsive I’ve used. This is as close to “insider information” that an ordinary investor is likely to see- and it’s entirely legal.
Follow us on Twitter for real time insider buying alerts at https://twitter.com/theinsidersfund
BEWARE– Following insiders can be hazardous to your financial health unless you know what you are doing. The Insiders Fund blog informs you of the purchases that count, the ones that are just window dressing into deceiving the public that all is hunky dory, and those that are just flat out other people’s money and should be just discarded like bad fish. As a rule, we only look at material amounts of money, $200 thousand or more, as anything less could just be window dressing.
The bar is different from selling because the natural state of management is to be sellers. This is because most companies provide significant amounts of management compensation packages as stock and options. Therefore, with selling, we analyze for unusual patterns, such as insiders selling 25 percent or more of their holdings or multiple insiders selling near 52-week lows. Another red flag is large planned sale programs that start without warning. Unfortunately, the public information disclosure requirements about these programs referred to as Rule 10b5-1 is horrendously poor. Also planned sales that just pop up out of nowhere are basically sales and are seeking cover under the Sarbanes Oxley corporate welfare clause. I also generally ignore 10 percent shareholders as they tend to be OPM (other people’s money) and perhaps not the smart money we are trying to read the tea leaves on.
Of course insiders can also be wrong about their Company’s prospects. They can easily be wrong about how much others will value them, and in many cases, maybe most cases have no more idea what the future may hold than you or I. In short, you can lose money following them. We have and we curse aloud, what were they thinking! Needless to say, past good fortune is no guarantee of future success. We may own positions, long or short, in any of these names and are under no obligation to disclose that. We welcome your comments on our analysis.
This blog is solely for educational purposes and the author’s own amusement. Investing with The Insiders Fund is for qualified investors and by Prospectus only. Nothing herein should be construed otherwise. THE INSIDERS FUND invests in companies at or near prices that management has been willing to invest significant amounts of their own money in. If you would like to hear more about how you can get involved with the Insiders Fund, please schedule some time on my calendar.
Prosperous Trading,
Harvey Sax
The Insiders Fund was the 4th best long-short equity fund in the world in 2019
