Insider Buying Report

Insider Buying Report – 1/31/13

The Insiders Report highlights those stocks that are rated highest in terms of Insider Buying for the past week.

Corporate insiders are often considered the “smart money” by Wall Street. For example, the research firm of Ned Davis Research reports that corporate insiders tend to be “relatively bullish at lows and relatively bearish at tops.”

In addition, in his book, Investment Intelligence from Insider Trading, Nejat Seyhun, who just happens to be a leading researcher in the field of insider buying and selling, illustrated that when top executives bought large amounts of his/her company’s stock, the stock outperformed the broad market by +8.9% over the next 12 months. And given that the long-term average annual return for the stock market has been +9.5% over the past 70 years, this means that stocks with heavy insider buying possess returns that are 93.7% better than the market itself. And then on the other hand, when an insider sold large amounts of his/her stock, Mr. Seyhun found that the stock underperformed the market by -5.4%, which is nearly 60% less than the market returns.

Do Insider Ratings Really Matter?

We certainly think so, but sometimes it is best to let the numbers do the talking. Below is a table showing the average annualized returns for each rating category, as determined by historical testing performed by one of the country’s largest independent institutional research firms.

Insider Ratings

SoTM
Insider
Rating

SoTM
Insider
Description

Average
Annualized
Return
4 Heavy Buying+27.73%
3 Light Buying+14.94%
2 Neutral +9.86%
1 Light Selling+6.16%
0 Heavy Selling+1.20%

 

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This Week’s Insider Report

Below is a table highlighting a handful of the stocks rated 4.0 as the date of the report. This is not a complete listing and the table below is NOT a list of stocks that we recommend buying now. To be alerted when we make a move in the Insider Portfolio be sure to take a free trial.

The Insider Report
As of January 31, 2013






 
Disclosure:
At the time of publication, the editor and/or affiliated companies own long or short positions in the following companies: None

Positions may be bought or sold while this publication is in circulation without notice.


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About the Author

Donald B. Moenning is the head of equity research at Heritage Capital Management, a Chicago-based investment management firm founded in 1989, as well as StateoftheMarkets.com. Don holds degrees in Economics and Business Leadership from the University of Puget Sound, lives in Denver, Colorado, and is an avid snowboarder.