Corporate insiders have an unfair advantage with their access to the inner workings of publicly traded companies.
Insiders must report to the Securities and Exchange Commission (SEC) any time they buy or sell stocks in their company, and this information is made public. Still, it is extremely difficult for individual investors to incorporate these disclosures into their research.
After all, there are almost 85,000 insiders – senior executives, board members, and 10%+ shareholders – submitting their trades to the SEC.
At TipRanks, our mission is to level the playing field for retail investors. One way we do this is by tracking and analyzing insider transactions and creating simplified, visual tools based on insider activity.
Here are two ways you can take advantage of insiders’ knowledge without becoming an insider yourself.
Daily Insider Transactions
If you want to be the first to know which stocks insiders are trading, Daily Insider Transactions is the tool for you.
It presents every buy or sell transaction made by a corporate insider, often hundreds a day. However, not only can this information be overwhelming, not every trade indicates sentiment.
A significant number of these trades are not worth following. That’s because they do not indicate sentiment, for example, an insider exercising share options. To make it easy for you to distinguish between transactions that indicate sentiment and those that do not, they are color-coded.
Transactions that don’t reflect the insider’s opinion are grey and state that the trade was “Uninformative”. Informative trades, that is those that do indicate sentiment, are turquoise when the insider bought shares, or purple if they sold.
Focus on the Trades that Count
With such a large volume of trades being reported daily, we included filters, so you can easily focus on the most interesting transactions.
As with all experts, TipRanks measures and ranks insiders based on their success rate, average returns, and the statistical significance of their transactions. The top performers have a 5-star rating.
When insiders make Informative Buy transactions, they invest their own money. This says a lot! Filter according to the amount of cash invested.
There is no good reason for an investor to study uninformative trades. Even Informative Sell transactions don’t always tell us much. Consider an insider selling shares to buy a new car, there is no indication the insider believes the stock price is about to go down. The tool enables you to filter according to all four types of trade, Informative Buy, Informative Sell, Uninformative Buy, and Uninformative Sell.
We recently researched which types of insiders make the best traders. Filter according to position, if you want to search for the trades of a certain group of insiders.
If you are looking to diversify your portfolio, filter according to eight different sectors.
Using the filters in the example above, we now have a more manageable number of transactions to consider. Click on the SEC form to open the actual Form 4 File the insider submitted, or tap the ticker name to see an overview of all recent insider transactions and access the rest of our stock analysis tools.
Insiders’ Hot Stocks
Insiders’ Hot Stocks is a powerful screener that focuses on stocks with insider trends. It enables you to search for stocks according to four different trading strategies, three of which have historically outperformed the S&P 500.
- Transaction Strategy – the Buy or Sell transaction by all insiders
- C-level strategy – the Buy or Sell transaction of chief level executives
- Major Event Strategy – such as Informative Buy transactions
- Top Ranked Strategy – the Buy or Sell transactions of the top-ranked insiders
Click on the S&P or Sector radio buttons to see how the strategies have performed against these benchmarks. It’s worth noting, that each stock was measured over one month.
The screener enables you to search for stocks according to strategy. Filter as few or as many as you would like. As with all our tools you can add or remove columns from the table. The results show you the reasoning behind a stock being included on the list, and by clicking on the ticker, you will see all recent insider activity for the stock, and be able to conduct a full analysis.
Where to Find the Tools
You can find both these tools on the TipRanks menu.
Research tools > Daily Feeds > Daily Insider Transactions
Top Stocks > Insiders’ Hot Stocks
Now give them a go and see how you can invest like a corporate insider without a career change.