Insiders Are Buying: You Should Too By: Tracey Ryniec August 09, 2014 We love it when a famous CEO buys a large chunk of his companys stock. Last year Elon Musk, the CEO of Tesla, bought over a million shares of Tesla stock for $100 million even though he already had plenty of shares. It made headlines. When Elon Musk bought in 2013, he was the only insider at Tesla buying at that time. But what about when non-famous insiders buy their companies stock and when a bunch of them buy en masse? This mass insider buying behavior is called a cluster buy and it is the strongest signal you can get in insider trading. When one insider buys, he might be considered an optimist, but when three or four insiders all buy at the same time? Now thats a powerful consensus. But youre not going to hear about the cluster buys from the media. There arent going to be headlines trumpeting the buys of a few corporate Directors and a CFO. Nope. The cluster buy simply isnt glamorous enough. Investors therefore have to dig below the surface to find the insider cluster buys. But once you do, thats where big rewards can be found. Cluster Buying Sends the Strongest Signal Why do insiders spend so much of their money on their own companies stock when they already own a ton of shares already? Greed! Pure and simple. The opportunity to make more money motivates people - even people who are already well off like highly paid CEOs and CFOs. When insiders buy in a cluster, its because they all know something very good is going on at the company. Maybe it is a new product. Or contract. Or pending merger. Whatever the reason, they are all very confident that shares will be on the rise.
Posted on: Sun, 30 Nov 2014 09:00:20 +0000
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