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| Q & A |
- What is an Insider?
An insider is an
officer, director, or beneficial owner of any publicly
traded US company. Insiders know what is going on in
their company. They have a tendency to buy before the
stock rises and sell before it falls. Insiders are
required to file their transactions with the Securities and
Exchange Commission within two business days following their
transactions.
- Why does your
system work so well?
Studies
have shown that stocks with insider buying outperform the
market by 7.5% (Nejat Seyhun, Investment Intelligence, page 61) over
the following twelve months following substantial insider
purchases. While those stocks with insider selling under
perform the market by 6.1%. Insiders are also very
knowledgeable about their company. They work there, and
know what type of business conditions will drive the stock
price up and down. When an insider purchases stock, they
see either value or improving fundamentals. They are
wrong sometimes, but not often. We also
have many smaller stocks on our buy list. These
smaller stocks often don't have analyst covering them so
they tend to be more inefficiently priced than the larger
stocks that have analyst coverage. In the case of these
small companies, insider buying is often the only clue to
the company's health.
- I noticed some other stocks
with insider buying, how come they are not on the buy
list?
We only focus on the most optimal buy
patterns. In particular, we like those patterns with unusual insider behavior. For example, insiders
that have not bought in many years, insiders that have bought
well in the past, and insiders that are making an unusually
large purchase may signal strong business conditions, a
precursor to higher stock prices. We also like patterns that
involve reversals, such as when an insider sold in the past,
and then turns around and at a later date buys a substantial
amount of stock. A good sign that the insider may now see
value or improving fundamentals ahead.
- Do you recommend
selling stocks?
Insiders
are required by law to hold a stock for six months after they
purchase it. We generally recommend an investor
use a stop loss if they take a long position. Our
service points out where insiders are buying, which
indicates the potential that the stock is residing at a
low-risk entry level. We leave selling decisions up to
the individual investor.
- Why don't you don't show all
insider
activity?
We focus on open market transactions, as they are the most
relevant and meaningful.
- Why do some of your stocks
have selling in them?
Insiders
are much better at buying than selling. It is normal for
insiders to sell and take profits. They sell for many
reasons.. What is important is the buying. They only buy
for one reason. That is, they think the stock is headed
higher. Buying into price strength, reversals from selling to
buying, unusual large purchases, these are the patterns
that suggests higher stock prices to come, even if it is
accompanied by some selling by other insiders.
- When are new stocks
available?
How many picks are
available?
Insiders
are required to file with the SEC within two business days of
their activity. So we are constantly monitoring for
interesting and meaningful trades. When we find one, we will
let you know. Generally, there will be a couple of new stocks
per week. But sometimes less and sometimes more. During
earnings releases, insiders are prohibited from buying and
selling. At these times, there will be less
activity.
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Does InsiderPicks.com provide
any other insider services? Such as the ability to
search insider transactions?
No.
We are a stock picking service. We search through the
insider transactions so you don't have to. We pick those
transactions that are most significant and interesting, and
present them to you.
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Do you provide short
ideas?
Not at
this time. However, if demand is sufficient, we may
provide short ideas based on insider selling in the
future.
-
Is InsiderPicks.com compensated
in any way for the companies it recommends?
Absolutely
not!
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