by Fred Fuld III
An insider is an executive officer or a director of a corporation, or an individual or company that owns more than 10% of the company.
When an insider buys stock in their own company, it is usually for a reason. It is usually because the prospects of a company look good and the stock is favorably priced. If an insider sells, it is often the opposite, although sometimes they need to sell to raise cash for various reasons. This is why insider buying is a better indicator than insider selling.
Of course, insiders are not allowed to trade on what is called “insider information”, which is significant non-public information.
However, insiders can invest based on their “feel” for the company. This is where the average stock investor or trader can use this to their advantage, because all insider transactions must be reported to the SEC.
Some stocks have had a substantial increase in insider buying, with several of them in the financial sector.
All of the following stocks have had over a 90% increase in insider buying during the last six months, and they all have a trailing price-to-earnings ratio and a forward P/E ratio of less than 15.
| Company | Symbol | P/E Ratio |
| Artisan Partners Asset Mgmt. | APAM | 11.04 |
| StoneCastle Financial Corp. | BANX | 5.11 |
| TCG BDC, Inc. | CGBD | 5.61 |
| Finance Of America | FOA | 0.34 |
| GMS Inc. | GMS | 14.56 |
| Western Alliance Bancorp | WAL | 14.02 |
Happy investing!
Disclosure: Author didn’t own any of the above at the time the article was written.