Everyday thousands of insider trades occur. Insiders can only use public information but their advantage is the interpretation of this data.
Insider trading activity is not a magic potion. Many newsletters have failed to justify their existence and have folded by solely relying or simply misinterpreting the information. But having said this historical results has demonstrated if used properly insider trading data does contain predictive information and can serve as a catalyst for the stock price.
If analyzed correctly trading by insiders should help convey directional information about a company’s stock price.
A summary of key points
Insiders have a better understanding of their business economics and top executives (CEO, CFO) have the most accurate record
Purchases reveal more information than sales. Multiple insider sales with a high short position reveal negatives.
Agreement by multiple insiders increases the predictive information of trades
The magnitude of transactions is important including number of shares and net value
Multiple buys over time with no sales increases the transactions information
Current purchase in one month increases the probability of purchase for the next month
Smaller companies with activity provide more information given they are less efficiently priced.
Only analyze open market transactions, ignore private transactions
Insider activity within industries such as biotechnology may provide more predictive power. The thesis is management understands the science and future possibilities of new drug breakthroughs or ability to pass future FDA hurdles
The results of the 03/24 post for March positive insider activity was as follows
take a look
I ran a query for positive insider activity for the one week ended 04/03/09
Stocks that have excellent value for different reasons were
NUTR $6.99
Nutraceutical Int'l Corp.
Drug Related Products
PRPX $6.38
Portec Rail Products, Inc.
Railroads
PRLS $1.80
Peerless Systems Corp.
Computers Wholesale
QLTI $1.78
QLT Inc. (USA)
Biotechnology
Price Quotes for the above
Quotes on the above
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