How to Profit from (Legal) Insider Trading Signals

When I am analyzing a company to see if it could potentially be a good long-term investment, I always like to know the insiders are doing. It goes without saying that they probably have a much better idea of what is happening in the company than most analysts. They certainly know more about it than I do. I especially like to see what they are doing after their company stock has fallen dramatically.

I am not implying that there is anything illicit or illegal going on. When an insider wants to buy or sell their company's stock they can as long as they follow very strict procedures. They have to file their intent to buy or sell with the SEC, and they are subject to ‘blackout periods’. These are times in which they cannot trade the stock. For example, an insider may be prohibited from buying or selling the stock in the thirty days before or after the earnings release is due to be reported.

There are many reasons why an officer or a director of a company may decide to sell their stock. They could need to raise money for things such as tuition, mortgages, weddings, or divorce settlements.

But they only buy it for one reason! And that is because they believe that the stock is undervalued and eventually it will trade at a higher price where they can make a profit.

These stocks came up on my radar screen as potential buys due to the significant insider buying that has recently occurred.

May 2nd, 2019 RRC, GRUB, ALSN, CERN, SFNC

April 7th, 2019 EQT, RMBL, ELGX, WBA CGAP

March 10th, 2019 EQT, LOB, KEM, WETF, SEIC