When Should Investors Follow Insider Trades?


Insider trading is when corporate insiders (officers, directors, and employees) buy and sell stock in their own companies. This data is available on a timely basis thanks to rules the SEC adopted per the provisions of the Sarbanes-Oxley Act of 2002. Changes in ownership, reported on Form 4, must be reported to the SEC within two business days. We’ll narrow our definition of corporate insiders as senior management and directors for tracking purposes. 
 
Insiders may sell stock for reasons having nothing to do with future results. For instance, insiders may sell their stocks in an attempt to better diversify their holdings and because of personal liquidity needs. Insider buying is much easier to understand. To quote Peter Lynch,

Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.” 

The question is when insiders’ trade should investors follow?
Continue reading the complete article here

Advertisements

About IIEX

Click "About" in the menu at the top for more information about the author. We also have a page at "Seeking Alpha" ( http://seekingalpha.com/author/david-klein ). Please Click on and read the "Disclaimer" in the menu at the top. Have a question? Contact us at iiex@live.com.
This entry was posted in AEO, GE, WRLS. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s