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Posts Tagged ‘insider activity’

Gaining the Edge

Posted by Larry Doyle on December 17th, 2010 7:20 AM |

What competitive individual worth his salt does not want to ‘gain the edge’? Have you ever come across successful individuals–success being a very relative term–who did not want to ‘gain an edge’ and then widen the gap with the competition? I haven’t.

I had fully intended on writing this morning about the ongoing developments in the insider trading scandal sweeping across Wall Street. ‘Gaining the edge’ is very much the common thread that runs through this story. The lengths to which selected individuals would go to ‘gain that edge’ make for interesting reading. The wearing of wiretaps by informants adds to the intrigue. Where will the story lead? Which hedge funds may be implicated? What ‘masters of the universe’ may fall while pursuing their untold riches and accompanying success?

Then I thought, why would I want to take readers into this seamy world and give attention to those who may break the rules to ‘gain that edge.’ I don’t. At least not today. (more…)

What Are Insiders Doing, or Pump and Dump?

Posted by Larry Doyle on June 1st, 2010 12:03 PM |

Who truly knows more about a company’s prospects than the executives running the operation? These executives, commonly referred to as insiders, are privy to sensitive, non-public information. Insiders are subject to severe restrictions in how they handle this information, and most importantly in how they manage their own finances.

Insiders selling company stock is not always an indication that the company is having problems. Insiders manage their own finances and will sell for a variety of reasons, especially for tax purposes. That said, monitoring insider activity is always prudent. Are there trends? Is activity heavily skewed in one direction or another? Is there a major inconsistency between insider activity and analyst recommendations? (more…)

‘Inside’ Information Makes a ‘World’ of Difference

Posted by Larry Doyle on June 22nd, 2009 7:24 AM |

Can an individual investor get a fair shake on Wall Street?

Many smaller investors believe Wall Street is biased against them. Why? Information is hoarded by major institutions who act upon it prior to it disseminating to individuals. With the development of the internet, information is processed and distributed much more quickly. How do institutional investors stay ahead of individual investors? Utilizing ETFs and financial futures.

How can individual investors try to keep pace with institutions? Track the activity of institutional insiders, that is, the senior executives within publicly traded corporations. An insider may have reason to buy or sell the company stock that goes well beyond company prospects. Often an insider will sell company stock strictly for tax purposes. However, when insider activity, either buying or selling, moves dramatically in one direction or another, every investor should pay attention. On that note, please pull in your chairs and pay particular note, as Bloomberg highlights Insiders Exit Shares at Fastest Pace in Two Years:

Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago.

Sales by CEOs, directors and senior officers have accelerated to the highest level since June 2007, two months before credit markets froze, as the S&P 500 rebounded from its 12-year low in March. The increase is making investors more skittish because executives presumably have the best information about their companies’ prospects.

In typical fashion, analysts assess this insider activity as nothing more than an attempt to lock in the returns of the recent equity rally. I seriously discount that. I view major moves in insider activity as a signal of strong, macroeconomic outlook. If the insider activity was more trading related, then the insiders would not actually sell the company stock but would more likely hedge it via purchasing put options.

What do all these insiders see on our economic horizon which is leading them to sell on such a massive scale? Well, the World Bank sees dark clouds out there. Bloomberg reports,  World Bank Cuts Forecast for Global Growth to 2.9%:

The World Bank said the global recession this year will be deeper than it predicted in March and warned that a flight of capital from developing nations will swell the ranks of the poor and the unemployed.

The world economy will contract 2.9 percent, compared with a previous forecast of a 1.7 percent decline, the Washington- based lender said in a report today. Growth will be 2 percent next year, down from a 2.3 percent prediction, the bank said.

This outlook on the global economy does contrast with a more sanguine view provided by the IMF.  While economic forecasts from different organizations and analysts will often vary, there is nothing vague about massive insider activity, and right now they are headed for the exits.


What Are Insiders Doing?

Posted by Larry Doyle on April 25th, 2009 9:12 AM |

Who knows a business better than the executive in charge? Well, given the performance of many companies over the last few years many investors may wonder just how well the CEOs and board of directors know their own companies. That said, tracking “insider” activity is always prudent.

One should NEVER buy or sell a company stock based merely on “insider” activity. An individual executive may have personal financial reasons outside of his opinion on the company’s future to buy or sell the company stock. I have heard people make investment decisions based purely on insider activity and it is a mistake.  Even so, one should be aware of insider activity within a specific company as a potential indication of executive sentiment. How does it go? Money talks…..

While insider activity for a specific company can be subject to particular individual circumstances, it defies logic to think that insider activity taken in totality is not an indication of overall executive sentiment on the future of the economy and market. (more…)

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