Why you should trade alongside insiders
In today’s world, trading stocks for profit can be a difficult endeavour for anyone. As we go toward a more globalized economy, financial conditions within the United States have become increasingly subject to influences from around the world.
In addition, the world is now saturated with news. It’s so easy to find news articles that investors can quickly become confused or frozen with a case of analysis paralysis. Despite these challenges, there is still another great way to profit from trading stocks without worrying about these other areas of research. This technique only requires you to follow the trading activity of insiders.
What is an insider?
Trading based on insider activity can be a very profitable venture. Insiders have deep knowledge about the future of their company and the profits associated with their business. So what is an insider you ask? Insiders are investors that have executive level jobs within the company of the stock you’re monitoring. That means they can be CFO’s, COO’s, CEO’s, board members or other high level corporate figureheads.
Because of laws and regulations established by the SEC, these insiders have to file forms every time they buy and sell stock for a company where they play a major role. These forms are then made publicly available and can be tracked and monitored.
How insiders act and trade
The benefit of keeping tabs on insiders is that they tend to buy and sell lots of stock before the rest of the public is aware of a major change of direction. For instance, they may feel that sales are strengthening in a certain market and you’ll start to see a lot of insider buying activity. They will also know about new products being developed before the general public.
This may be another strong driver of stock purchases. Conversely, insiders also sell when they feel that their business or products won’t be strong in the future or when their company is heading into a major transition period. These are good times to avoid investing in the company’s stock, so if you see an insider selling a lot of shares in their company, make sure to think twice about buying some yourself.
In addition to tracking insider activity, it’s also a good idea to see how much of the total shares outstanding are owned by insiders and owners. Companies that have high levels of stock ownership from insiders and owners perform much better than those that don’t. It makes a lot of sense since these owners and insiders have a huge vested interest in the company because they own a lot of shares of the stock. These managers tend to do a much better job at running the company, protecting profits and driving a vision so that they also make more money in the process.
Insiders know things you don’t
Tracking the purchasing activities of insiders makes sense. Insiders know things that the general public doesn’t and they are immersed in the day to day business, so much so, that they can make much better predictions about it’s future prospects than we can. Following along with major insider activity is a simple endeavor that can lead to nice returns once you get the hang of it.
How KINFO tracks insiders?
KINFO tracks over 70 000 corporate insiders based on their filings to the SEC. Under each stock page you can view insider transactions over time divided into four categories. C-Level, directors, other and 10% owners. In addition to category you can see exactly what role an insider has and the relative size of their transactions. Using this view, you can get valuable insight into relevant influencers confidence in the company they work for. Learn more about how KINFO tracks corporate insiders.
