What stocks are insiders buying? Here’s the top five
(Story by John Dorfman, chairman of Thunderstorm Capital)
One stock market indicator that doesn't get enough attention is the purchase or sale of company shares by insiders. I think such trades give useful cues for stock picking, and I suggest the following guidelines for interpreting them.
1) Purchases by CEOs, chairmen and presidents have more predictive value than purchases by directors or lower officers. 2) Large purchases count for more than small ones, of course –dollar value is a better measure than the number of shares. 3) Open-market purchases are more significant than the purchase of shares by exercising stock options. In many cases, the terms of an option are such that an executive would have to be a dolt not to exercise it.
Using Bloomberg analytics, I identified the companies in the Standard & Poor's 500 Index whose insiders purchased the largest dollar amounts of stock in the three months ended Sept. 1. What follows are the five companies that headed the list.