Insiders sell for all sorts of reasons, but there is only one motivation for insider buying.
After all, CEOs and directors might engage in insider selling because their stock options are about to expire or they need to pay taxes. Some insiders even sell to diversify their personal holdings, which is actually a good sign. (Any CEO foolish enough to have all his net worth tied up in a single security isn’t fit to run a public company.)
But insider buying is another matter entirely. There is only one reason for an insider to up his stake in the company: He or she is bullish on its prospects and share price.
Insiders, of course, have a unique view of what’s going on in their companies and industries. If they’re buying more stock, it’s probably because they know something you don’t — and that something is likely very good.
We screened the market for recent bullish insider buying — that is, cases where the stock rallied sharply soon after the insider made purchases in the past.
True, looking at share performance after historical insider buying isn’t a sure thing — nothing is — but investors are better off knowing about it. If shares rose 30% in six months after the last two times a CEO bought stock in his own company … well, there’s a good chance the stock will rise after his latest purchase too.
Based on past purchases, here are five stocks insiders love that rally on insider buying: