What insiders know (that most investors don’t)
Monday, August 29th, 2011Imagine a wonderful warm summer night, a night where you and your loved one are taking a nice cruise in the Caribbean, relaxing outdoors, getting ready to enjoy a beautiful sunset. You are on vacation and can’t help but be the typical tourist with a floral pattern shirt on, walking around with flip-flops and the camera hanging around your neck, sipping on a tropical smoothie. Heck, this is your moment to live it up, might as well enjoy the moment and dream of the fun that is coming up over the next few days. Put your arms out, feel the breeze and take a deep breath of the ocean air. That would be a great moment on the cruise ship.
Then imagine in that moment you look over the side of the boat and see the captain and first mate rowing away from the ship in a small boat. As they row as fast as they can away from the ship, what would go through your mind? If you are like most people, it would be “what the heck do they know that we don’t and how fast can we get off this ship?” If you were on a cruise, wouldn’t you want to know this information?
Did you know that when it comes to owning public stocks, that type of information is available? Investors can find out if the corporate insiders, such as directors, officers and key employees are buying or selling their company stock; it’s called “insider trading.” Although that term is often associated with illegal activity in the news and in movies, usually it is perfectly legal as long as “insiders” properly disclose it, which then becomes available for investors to review. Knowing if “insiders” are buying or selling can be helpful to investors in making an informed decision.
Insiders trading on nonpublic information can be illegal, as we saw with Martha Stewart and with Enron, where many people were put in jail for illegal insider trading. This is illegal because the failure to disclose insider trading can damage investors’ confidence and give an insider an obvious advantage, knowing information that the general public is unaware of. This is why trading is almost always disclosed by insiders and has become one of the Securities and Exchange Commission’s top priorities.
It is important to review insider trading on companies an investor is considering buying or selling, but it is not the whole story. Don’t make a decision based solely on “insider trades,” as additional research should always be done before buying or selling any investment. We share this information with investors as a service and insight. It is important to know, but it doesn’t mean the stock an investor is buying or selling will go up or down just because of what the insiders are doing. Yet, wouldn’t you agree it is important to know what they are doing?
Finding out details on “insider trading” is really pretty easy. Most major financial websites have a link that an investor can review to see what insiders are doing.
For investors who own individual securities or who are considering buying or selling stocks, we suggest reviewing what insiders are doing.
So what are corporate insiders doing right now? According to Vickers Weekly Insider, insider buying compared to sales is currently at the highest point since 1998. There has been a “16-fold jump during the last three weeks” in buying according to its research.
Right now is one of the rare times that buying is outnumbering selling. That, in our opinion, is a good sign that many corporate insiders believe in their companies right now.
For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysnetwork.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group, Inc nor its representatives provide tax advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. (419) 842-0550. Source: http://www.cnbc.com/id/44161947
















