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You're probably talking about COMPANIES buying back their stock, not directors or founders. Of course companies act for the well being of the company itself, w
by paolomaffei 16y ago
You're probably talking about COMPANIES buying back their stock, not directors or founders.
Of course companies act for the well being of the company itself, while directors only for theirs, so yeah, insider buying by a company or a director is totally different.
- kenjackson 16y agoI get that their different, but does the data back up insider buying translates to undervalued stock? I used stock buybacks as an example where people used similar logic to justify a stock being undervalued, but the data didn't bear it out. My question is does the data bear it out (presumably the data exists) or is it just an assumption based on the idea that insiders _should_ have a pretty good idea of the value of the company.
- dandelany 16y agoSome data here: http://books.google.com/books?id=iYuh-gfnwb0C&pg=PA361&lpg=PA361&dq=insider+buying+statistics&source=bl&ots=cs3Kv8Id4q&sig=T5F5gPM_kYKVUx6AtbZALn970uA&hl=en&ei=PD_WTOnNDJG4sQOKxoGNCw&sa=X&oi=book_result&ct=result&resnum=2&ved=0CCAQ6AEwATgK#v=onepage&q=insider%20buying%20statistics&f=false http://books.google.com/books?id=iYuh-gfnwb0C&pg=PA361&#... Basically, it seems that extreme insider buying is a very good sign for the market as a whole, but it's fairly rare. (31.7% returns in one three month period w/ insider buying signal, vs. avg. 4.2% returns in 75 3-month periods w/ insider selling signal) In terms of individual stocks, it seems that the predictive power of insider buying as a metric is best when mixed with taking into account the company's dividend yield, and they claim that this gives you a 6.2% edge.
- kenjackson 16y agoThat's good to know. I should set something up so that when I do detect insider buying, I go hugely in on the S&P500. For individual stocks the difference is too small for me to feel comfortable.