Each year, my team and I analyze more than 100,000 trades, searching for the right signals.
It’s a lot of data, but it gets culled down pretty quickly…
First, I throw out the options exercises.
A lot of C-level executives receive stock options as part of their compensation. Just before the options expire, they convert them to stock…
We ignore these trades since the insiders are not buying with their own money — they’re just cashing out.
Next are those that are part of a regular buying schedule.
Let’s say the CFO buys 10,000 shares on April 1 every year.
For our purposes, this is nothing significant.
He’s not acting on or trying to exploit new information…
So we can throw those trades out too.
I also ignore trades that are very small.
For example, the CEO buying $5,000 worth of stock doesn’t show any conviction.
But a director who makes $60,000 a year investing $200,000… now that’s a high conviction trade.
He’s betting a lot of money…
And making a HUGE investment. So that’s something I’m going to pay attention to.
Then, once you filter out institutional buyers, trust activity, and insiders with poor track records, you’re left with a much more actionable set of trades.
Now, remember the elite group of 272 insiders I mentioned earlier?
… The ones who have never lost?
Their buys gained 100% or more 26 times in 2014…
24 times in 2015…
And a record 39 times last year. In other words…