Insiders ALWAYS trade on inside information. Most of the time, the transactions are either borderline legal or illegal and un-prosecutable. From time to time, some really dumb insiders trade right before major announcements and get caught. But those cases are rare.
Most of the insider transactions happen well in advance of any material developments, meaning they won’t be taken to court for their profits. Recent academic studies have shown that imitating insider transactions generally yield 5-10% higher returns than the market. Let me say that again. Instead of investing in index funds such as Vanguard or SPY, you can make 5% more on the average if you imitate insiders’ transactions. These results are not unique to US markets either. In several European markets insiders magically manage to beat the market indices. This isn’t just a coincidence, data mining, or statistical fluke. I will discuss the merits of investing by using insider transactions some other time.
Now, I will focus on recent mega insider purchases. In the 5 stocks insiders bought like crazy in August and September, large shareholders bought tens of millions of dollars worth of shares. In some cases, a group of insiders bought all those shares. I am not hand picking only the companies with good results. These are the results for all the companies with a total of $50 million or more in insider purchases. Most of these transactions have been very profitable for the insiders. Here are the companies with gigantic insider purchases:
(This post originally appeared at Insider Monkey and is republished with permission.)
There were several insiders selling their shares or exercising their options in VMW. Only one insider is responsible for all of the purchases in this company. See the details of these transactions and how this insider made 60% from the first purchase in VMWare Inc. at Insider Monkey.
Several insiders bought around 4 million shares of this mining company at its IPO at $14 per share. However, the IPO was a disappointment and prices dipped below $13 a share just days after the IPO. See the details of these transactions and stock returns since the IPO at Insider Monkey.
When the stock prices start to go down in mid August, the insider in this insurance company stepped in to buy company shares at around $80 per share. They kept buying shares until the stock price crossed a magic level. See at what price insiders stopped buying and how much they made in just one month at Insider Monkey.
Carl Icahn already had nearly $2 billion worth of Motorola Stock. What made him invest another $100+ million in MOT? See how much Icahn made in just 3 weeks and what other insiders of Motorola are doing at Insider Monkey.