What Does Insider Buying Indicate?



UPDATED: March 2022





What Does Insider Buying Indicate? - Insider buying is generally seen as an unambiguous signal regarding how insiders feel about their company. The one thing that motivates all investors to purchase stock in a company is that they have expectations the stock will rise in value. It's not a significant event if you notice one investor buying stock in a company. However, if you notice that several insiders are buying stocks in the company, that insider activity should grab your attention.





What Does Insider Buying Indicate?





You can count on insider buying to be a positive signal and something good for the price of a stock because when insiders purchase stock, there is less stock available for the public. The stock price will rise if the investigating public decides to invest in those limited number of stocks. It would help if you keep certain factors in mind when you are analyzing insider buying:





* Who is Purchasing the Stock?





You notice that the CEO of a company purchased 5,000 shares. Is that reason enough for you to invest in the company's stock? That could be a good indicator because the CEO is the one person who has access to all the financial reports and knows how well a company is performing. However, you should investigate whether the CEO is new to the company and whether they have other stocks before their purchase. The reasons for them buying the stock could only be part of their employment package.





It's not a strong signal if a company executive is investing in the company's stock for the first time. However, if they are doubling their investment and other insiders are jumping on board and purchasing stock in large numbers, it is a strong signal that something big is about to happen with that company's stock price. These signals help determine what does insider buying indicate.





* Find Out How Much Stock is Purchased?





In the example above, we shared how a CEO bought 5,000 shares in the company, which is a significant amount of shares no matter how you look at it. However, is that enough for you to jump in and invest in that company's stock? You should investigate the stock purchase closely to get a clearer picture first. If the CEO already owned a million shares before they purchased the additional shares, it wouldn't show you much in terms of whether the stock price of a company will rise.





However, if the CEO owned 5,000 shares and has now decided to purchase a million shares of that company's stock, that should grab your attention. Such a massive stock purchase tells you that the CEO knows the company's prospects are on the rise. That is the reason why they have decided to increase their stake in the company. Again, you should look at how many people are buying stock following the CEO's purchase. The number of people interested in that company's stock will give you a strong indication of whether you should invest as well. This is why it's so important to learn what does insider buying indicate.





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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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