UPDATED: March 2022
How to Pick up Stock Investment Tips from Insider Activity – For investors, rarely is insider stock buying seen as negative since it is mainly considered a good thing for the stock and is a neutral event. However, insider selling is a different story altogether. So, when insiders sell stocks, it is considered as a negative or neutral event.
Table of Contents
- 1 How to Pick up Stock Investment Tips from Insider Activity
- 2 Diversifying their Holdings
- 3 Financing Personal Emergencies
- 4 Buying a Home or Another Major Purchase
- 5 1. How Many Insiders Are Selling?
- 6 2. Are the Insider Sales Showing Unusual Activity or a Pattern?
- 7 3. How Much Stock Is Being Sold?
How to Pick up Stock Investment Tips from Insider Activity
Figuring out insider selling is also a bit more complicated than insider buying. That’s mainly because insiders can have different reasons to sell their stock, which don’t have anything to do with the future prospects of the company.
So, if the company’s CEO decides to sell 4,000 shares from their personal account, this doesn’t mean that you should be thinking about selling as well. There are several reasons why insiders may be selling their stocks. They may know that the company isn’t going to do well in the future, which is a negative sign, or they may simply require the money for personal reasons that don’t have anything to do with the potential of the company.
Some of the main reasons why insiders choose to sell their stock are:
Diversifying their Holdings
When the portfolio of an insider is weighted heavily with the stock of one company, they may be advised by their financial advisor to sell the stock of that company and purchase other securities to balance their portfolio.
Financing Personal Emergencies
Most times, an insider will sell their stock because they need money for legal, medical, and family reasons.
Buying a Home or Another Major Purchase
Sometimes, an insider may need the money for paying the down payment of a home or for buying something without needing to take out a loan.
So, how does one find out the critical details of insider stock selling?
Even though insiders must report their stock purchases and sales to the SEC, this information doesn’t reveal much. To help you out, we have highlighted a few questions you should ask when analyzing insider selling.
1. How Many Insiders Are Selling?
Look at the number of insiders are selling their stocks. If only one of them is selling, this single transaction doesn’t mean anything. However, if most insiders are selling, it raises a red flag.
2. Are the Insider Sales Showing Unusual Activity or a Pattern?
If you start seeing a pattern emerge regarding the number of insiders selling their stock, then that is cause for concern. Unusually high numbers of insiders selling their stocks generally mean something is amiss. Look for potentially negative news concerning the company and if massive insider selling has taken place after that.
3. How Much Stock Is Being Sold?
You need to look at whether the CEO of the company is selling stock as well, because if the CEO has sold most or all of their stock, then it’s a big deal. You should check whether other executives in the company have also sold their stock.
About the Author & How YOU Can Profit: This article is the copyrighted product of the team at BuybackAnalytics.com .
Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept: Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:
LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)
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