Insider trading activity can be difficult to predict as you need to understand the motivations of insiders when they are trading in company stocks. That makes predicting stock performance using insider activity impossible, but there are ways you can use it to your advantage. The main concern that you must have when predicting stock performance is the number of insiders who are making trades in the market.
When insiders are confident in a stock, they will invest a major chunk of their money into the stock. That will result in more insiders buying the stock, and suddenly, the demand for the stock rises. That demand will then trigger a rise in stock price, and pretty soon, investors will be reaping the benefits of their investment. However, it doesn’t work that way for all stocks, as there are key indicators that determine whether a stock price will rise or fall in the market.
We will share the best ways you can predict stock performance using insider trading activity. You should look at all the various factors in play before investing in any stock, and these tips will help you make profitable stock investments. Here is what you should know:
1. Insiders are Buying in Bulk
If company insiders are buying stock in bulk, it is a strong indicator that they believe the stock price will go up in the future. They have access to the financials of the company and know that there will be a major announcement in the future that will see the stock price rise. Therefore, you must look at which quantity the stock is being bought by insiders. When more insiders are purchasing stock in bulk, it shows you that they are confident the stock will perform well in the coming months.
2. The Company Has Repurchased Shares
Another stock signal that investors can look at is whether the company has repurchased shares recently. That shows the company thinks its stock is undervalued, and most corporate insiders will choose a stock buyback to drive the stock price up. You can learn a lot from a stock buyback as it signals that the company wants to increase its stock price and believes that it is currently trading below value. That places you in a solid position to invest in that company’s stock and benefit from the stock price going up.
3. Top-Level Insiders Are Investing in Stock
When the top-level insiders in a company invest in the company’s stock, it is a good indicator they believe the stock price will increase in the coming months. You can look at which insiders invest in company stock and use that information to predict stock performance in the future. That will place you in a strong position when you want to invest in company stock.