But turn the equation around. Why would insiders buy significant amounts of their own companies' stock with their own money at current market prices? There is only one logical answer. Given all they know about the company - including plenty of material, nonpublic information - they feel the shares are selling for a lot less than what they are worth. Remember, corporate insiders know things like... - The direction of sales since the last quarterly report
- Any expansion plans (or potential mergers and acquisitions)
- Whether the company has gained or lost any key customers
- New products in development
- Whether there is any takeover interest
- The status of pending litigation
- Plenty of other important information unavailable to those of us on the outside looking in.
That's why the SEC requires corporate insiders - officers, directors and beneficial owners - to file a Form 4 within two business days of any purchase or sale, detailing the number of shares bought, when, at what price, and so on. Sophisticated investors know what insiders are doing. To buy stocks that they are bailing out of or sell stocks that they are eagerly buying can be a fundamental mistake. Even when recent developments at the company are worse than expected, if the insiders are buying heavily it is generally a sign that the company's prospects are about to change. And the stock is likely to head higher. Indeed, plenty of academic studies have confirmed that stocks with heavy insider buying tend to outperform the broad market in the months that follow. Do you know which stocks the insiders are piling into right now? You should. Right now I'm finding that insiders are buying a surprising mix of brick-and-mortar retailers, technology leaders, biotechs, financial firms and disruptive companies. Many of these stocks will be future market leaders. No market signal is infallible, of course. But insiders clearly have an unfair advantage. In fact, some insiders are buying shares of companies that only just went public - and are ripping higher. I recently sat down with Oxford Club Executive Vice President George Rayburn to discuss this very topic. To sign up to view our discussion, just click here. And see why strong insider interest is "the best buy signal you can get." Good investing, Alex | 
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