RE:RE:RE:RE:RE:RE:RE:RE:Directors loaded with Stock now what? Good point SW, although insider buying is a tricky business to interpret imo. For example. I especically like #2 on the list below. #4 makes sense..................bottom line, insider TRACKING is not easy.
"Employee stock options, which compose an ever-larger portion of executives' compensation, can make analysis of insider buying tricky. Remember this: if the insider is exercising stock options by buying the stock, it is not very meaningful if the options were granted at rock-bottom prices. At the same time, when buying through the exercise of their options, executives do not have to disclose this. Outsiders can really only guess how much "real" buying is taking place.
Tips for Using Insider Data
Investors should consider the following guidelines when analyzing specific insider trading situations:
1. Some insiders are better than others.
Directors know less about a company's outlook than executives. Key executives are the CEO and CFO. People running the company know the most about where it is heading.
2. A lot of trading is better than a little.
One or two insiders at a big corporation do not make a trend. Three or more provide a better indication that something is happening. Generally speaking, solitary trades are unreliable.
3. People at small companies know more
At small and mid-sized companies, virtually all insiders are privy to company financials. At big corporations, information is more dispersed and typically only the core management team has the big picture.
4. Stay the course.
Evidence suggests that insiders tend to act far in advance of expected news. They do this in part to avoid the appearance of illegal insider trading. A study by academics at Pennsylvania State and Michigan State contends that insider activity precedes specific company news by as long as two years before the eventual disclosure of the news.
The Bottom Line
Here is the upshot – insider tracking is not easy, and it is hardly a guarantee of big returns. A pattern of trades might offer a signal for upcoming market shifts, and it is certainly reassuring to buy or sell a stock knowing that an insider is doing the same thing. Following the lead of insiders, however, will never replace diligent research.
(For more on how to find insider data and how it can help your investing decisions, see "Keeping an Eye on the Activities of Insiders and Institutions.") "