Insider Buys vs Share BuybacksInsider Buys vs Share Buybacks
Insider Selling Part one
Insiders know the company best and many people refer to the insider transactions to see whether management has been buying or selling.
When you sell shares, your reason could be a combination of any of the following:
The share price is too high compared to the fundamentals
You need to make a big payment for something
You need the money for an emergency
A better opportunity has appeared
To receive a tax break
Besides the first point, the reasons for selling are not related to the stock itself.
Insiders are people too, and just like us, there are times where they have to sell their stocks for personal reasons.
If an insider is dumping shares, that is a different story and you have to know why, but aside from that, I have found that it is ok to give them the benefit of the doubt.
Insider Buying
On the other hand, compare the above list to the following reason for why you would buy shares of a company.
You believe it is a good price and you can profit.
There are many reasons to sell, but only one for buying. Because it is cheap.
Insider Transaction Strategy and Back Test
Heavy insider buying is also the trait of a very cheap stock, which is a major theme of this value investing blog. Heavy insider buying also means that the company has run into trouble for the stock to be priced so attractively that insiders are willing to use their own cash rather than just vest with options.
Share Buybacks
Share buybacks is similar to the idea of insider buying, except, the company will authorize the repurchase of shares.
Share buybacks have the advantage of reducing the number of shares outstanding, which will increase EPS. Companies can then report higher EPS in later periods even though nothing has changed. Since Wall Street glorifies EPS, this should serve to increase the stock price.
Share repurchase plans also gives the view to the general public that management considers their company stock to be cheap enough to buy. This isn’t always the case, but the perception is true.
Another view is that the company is buying back shares because they have ample cash lying around. Repurchase programs are also announced publicly which provides greater exposure.
While insider buying leans towards cheap stocks, companies that announce share buybacks are well capitalized with operations are running smoothly. Both types of buying are shareholder friendly management, but which one will perform better?
Insider Buys Part two
I only use insider info as a tool to confirm my buy was on the right track
The problem with insider info is they will be out before you,unless your one of the smart ones and get out before them,or into any heavy volume on the upswing.
Insider points
Insider trading is a great tool but it is no panacea
If any bad news comes out it will drop faster than it went up
Make sure your information is timely
Insiders are not always right either
why did the insider buy it
What is the pattern of the insider buyer
Sometimes insiders buy in order to shore up their prices,as many only go by insider trading for their buys.
Insiders can make a killing by going ,long and short
Parlane res [PPP ] insider buy's was very heavy in Nov/2014
Parlane just did a 1/5 reverse split.may/2015