Continue reading...Insider buying and selling data can be extremely valuable for the individual investor. That is, if one knows how to use that data and interpret it so that a meaningful investment decision can be made.
Insiders (executives and beneficial owners) must file what is called a Form 4 with the Securities and Exchange Commission (SEC). The form essentially outlines the date and price at which a given executive has completed a large transaction in a stock. This data is then used by the investment community as a gauge of insider sentiment.
But what specifically should an investor look for in this information and what should be ignored? Here we’ll provide some guidelines for interpreting insider data.
Clusters There are many reasons why an insider might sell a stock. The person may be buying a house, have an immediate cash need, or simply be looking to diversify his or her portfolio, which may be heavily tied to the share price. All are legitimate reasons to sell. Therefore, investors...
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