The downside with insider sales is that you never really know the reasons why a given insider chose to sell the amount of shares they did, and why they chose to do so at the time. Maybe it’s because they need to diversify their investments, maybe it’s because they want to cash in some of their winnings, and maybe its because they know the company is about to implode.
That’s why insider buying tells you a lot more. Very few people are going to risk their own hard-earned money purchasing stock of the company they work for unless they feel pretty certain the stock is undervalued, or they expect the stock to outperform other investments in the medium-to-long term.
Rarely, however, do other investors get the chance to buy in at or below the prices the insiders did. The price may have fallen for any number of reasons that have nothing to do with the long-term fundamental outlook. Regardless, you have to figure that there was insider buying at an even higher price, there’s probably a floor to the stock price that you can be fairly certain of.
With that in mind, let’s look at three stocks that will let you beat the insiders: