Stocks with Big Insider Buying

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.

How to Make Money From Insider Trading Legally

by Fred Fuld III

You may have heard that insider trading is illegal. And it is, un der most circumstances. An insider is a top executive, a director, or a holder of 10% or more of the outstanding shares of a corporation. If an insider gives you information about the company that is not disclosed to the public, and you act on that info to profit from buying or shorting the company’s shares, that is illegal.

However, insiders are allowed to buy shares in their own company, as long as it is reported to the SEC in a short period of time. Also, the purchases and sales that the insiders make is available to the public.

For long term investors, this can be useful information, especially if insiders make purchases, because they usually do so based on a long term horizon. If they sell, it could be for any number of reasons totally unrelated to th company, such as raising funds to buy a house, estate planning purposes, paying for their kids college education, or diversification.

So if you look for the stocks that have has more than a 20% increase in total insider ownership over the last six months, you might find some interesting investment opportunities. All of the following fit that category, plus they ll have price to earnings ratios of less than 15, forward P/E ratios less than 15, and a low price to earnings growth ratio of less than one.

Company Ticker Market Cap P/E
Apogee Enterprises, Inc. APOG 880.84M 11.33
Avon Products, Inc. AVP 772.51M 6.32
Famous Dave’s of America DAVE 41.90M 9.31
GMS Inc. GMS 627.56M 12.22
Hyster-Yale Materials Handlg HY 979.49M 13.4
Koppers Holdings Inc. KOP 381.94M 12.49
McDermott International MDR 1.25B 3.47
Riverview Bancorp, Inc. RVSB 165.13M 10.7
Olympic Steel, Inc. ZEUS 176.46M 3.93