What Insiders Are Buying And Selling

I use a number of tools for screening and evaluating stocks. I particularly like Fidelity’s stock screener interface, and I will generally use it as a first pass for selecting promising companies. FactSet, the data provider for Investing Daily, also offers excellent tools for screening and evaluating companies.

In addition to these tools, I use a customized service from Paladin Automation LLC. There are many different services offered, but I primarily use it to find option contracts that meet my specific requirements. If you have a portfolio of 50 companies, it can take quite a while to seek and find the best option contracts when you are doing covered calls on your companies. With the automation service, I can plug in the stock symbols and then the program will quickly find the options that meet my desired yield and return characteristics.

One of the other features offered by Paladin Automation is a screen of the top insider transactions over the past week and month. Insider buying is a strong signal about how a company insider feels about the company’s prospects. Thus, insider buying is a sign that those with the most knowledge about the company feel like the future looks good.

I don’t believe you can put as much credence in insider selling, because many insiders are paid in stock. It’s natural that they would sell some shares both to diversify and to generate cash as needed. However, if many insiders are selling the stock, or there are substantial divestments by insiders, it may be a sign that the company should be avoided.

With that said, here are the Top 20 insider buys over the past week in relation to the total shares of the company (% of float). Note that this measure will tend to favor smaller stocks, as purchases will represent a larger percentage of the overall float.

This list covers a variety of sectors, but the financial sector is the most heavily-represented sector.

Using the same criteria, here are the Top 20 sales by insiders over the past week.

Again, these sales represent a wide variety of sectors. The health care sector looks to be the most heavily-represented sector among the sales. However, I don’t think there’s enough information there to make any conclusive determinations over which sectors seem to be most bullish or bearish based on these insider transactions.

Note that these transactions are simply another tool in the due diligence arsenal. If I were looking at two different companies with similar metrics, and one had a lot of insider buying, that’s definitely another positive signal for that company. Likewise, if I owned a company or was thinking about buying a company that was experiencing heavy insider selling, that’s a data point that might give me second thoughts.

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