|  | The financial media is full of scary new reports indicating investors should cut back on stocks or flee the market altogether. The reason? SEC data show a high ratio of insider selling.
I've been following insider activity in the stock market for decades, and while officers and directors are the epitome of "smart money," the mainstream media - as usual - is painting an incomplete picture.
Let's start with the facts. In recent weeks, insider selling has outnumbered insider buying by a ratio of almost 10-to-1. That's the most bearish reading in almost 15 years.
Moreover, insiders are generally worth paying attention to. Not only do they know more than we do about their employees, customers, suppliers and competitors, but they have access to all sorts of material, non-public information like the direction of sales since the last quarterly report, the gain or loss of major customers, the pending settlement of litigation, new products and services in development, and so on. That can't help but give them an unfair advantage when they transact in their own stock. It's also why the SEC requires them to file a Form 4 (electronically and within two business days) detailing how many shares they bought or sold, on what date, and at what price.
Sometimes when the insiders are bailing out en masse, it is indeed a negative commentary on the prospects of a business. Other times it is because they are diversifying their portfolios, paying for an expensive private school or maybe even getting a divorce. Bill Gates has been a regular seller of Microsoft for more than 20 years. Not because he doesn't like the company but because he has almost his entire net worth tied up in it.
However, a fuller understanding reveals the recent ratio of insider selling is nothing to get alarmed about. A high percentage of sales in recent weeks were the result of just a few insiders selling a huge number of shares. The first week of March, for example, John Schreiber, a director of General Growth Properties (NYSE: GGP), sold 18 million shares worth $356.4 million. Officers and directors of FleetCor Technologies (NYSE: FLT) sold $400 million worth of shares. Directors of Charter Communications (Nasdaq: CHTR) sold more than $550 million worth. If I were a shareholder of these companies, I would take a closer look and check things out. But the sheer size of these sales skews insider data and says nothing about how the vast majority of insiders feel about the market. | Sponsored
U.K. Gov't Pouring Cash (Finally) Into Unusual New Discovery "'Super Material' Gets Government Backing," read the recent headline from The Guardian. Seems the Brits are worried everyone is going to cash in on this technological miracle before they get a dog in the hunt. And they just might be right... Because oddly, we know of one tiny American company that already holds patents on some of the most promising applications! We've got the full story for you right here. | Of course, insiders don't know any more about the future of the economy or the entire stock market than you or I do. They are experts on their own companies' prospects, not the direction of the whole S&P 500.
If you see insiders bailing out of their own stock, it's at least a reason for concern and perhaps a reason to lighten up on your own shares. But as I mentioned, there are legitimate reasons for insiders to sell their shares that have nothing to do with the outlook of the company.
The time to really pay close attention, however, is when you see insiders piling into their own companies' shares with their own money at current market prices. As buy signals go, it doesn't get much better than that.
Dozens of academic studies have confirmed that companies under heavy accumulation by the officers and directors who oversee them tend to outperform the market averages by a wide margin.
So if you're looking to put fresh money to work, a good place to start would be companies experiencing significant insider buying. That's the kind of news worth listening to...
Good Investing,
Alex
Editor's Note: As many of you know, Alex runs a trading advisory called Insider Alert. Over the years, he's generated tremendous wealth for his subscribers tracking these SEC filings.
But there's one thing he hasn't shared yet with his readers. It's a similar strategy that has generated short-term gains of up to 646%.
But it's not for everyone.
In a way it's like dynamite; when used properly, it can produce some truly amazing results. But when used improperly, foolish investors can blow their thumbs off.
That's why he's kept the lid on the strategy for the past 11 years.
But next Tuesday, April 16, we're set to release a special report to those interested in this extremely lucrative, but potentially risky, strategy.
You won't want to miss it... |
   
Market Metrics 'Tis the Season... for a Pullback in Transport Stocks For those who missed Matthew Carr's article last week, you definitely want to check it out here.
Matt explained how you can profit from seasonal patterns in individual stocks and sectors. The example he used was transportation stocks. For instance, take a look at JB Hunt Transport Services (Nasdaq: JBHT).
Since 1994, holding JBHT from October to May has resulted in losses only twice - a 15.58% loss from October 2008 to May 2009, and an 11.83% loss from October 1996 to May 1997.
Since 1992, the average gain on this trade is 30.31%, and the current gain on the trade from Oct. 1, 2012, to today is 43.26%... And that's not including dividends.
But, if we take a look at the move from May to October since 1993, shares returned a positive result only five times...
As you can see in the chart below, it looks like we're starting to see some weakness in transport stocks as we head into the final month of the trend.
So what sectors do we look at now?
According to Matt, there are plays - prime periods to jump in and out - all throughout the year. And the results are fantastic. Your risk is cut in half, and you can increase your gains by 300% to 600%.
To learn more about Matt's new system in detail, click here.
- Justin Dove 
Click here to view the full chart. |
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