Top 5 Reasons Why Every Stock Investor Should Look at Insider Trading Information
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As an investor, you're always looking for an edge to help you make better investment decisions. One source of information that can provide valuable insights into the prospects of a company is insider trading activity. Here are the top five reasons why every stock investor should look at insider trading information. In 2020, the top insider buyer of stock was Tesla CEO Elon Musk, who purchased over $1 billion worth of the company's stock.
Insider trading can signal confidence in a company's prospects
Insiders are people who have access to non-public information about a company, such as executives, board members, and major shareholders. When insiders buy or sell their company's stock, it can provide valuable information about how they view the company's prospects. For example, if a CEO buys a large amount of company stock, it could be a signal that they have confidence in the company's future and expect the stock price to rise.
(Strike.Market insider trading data)
Insider trading can provide insights into a company's financial health
Insiders have access to financial information about a company that is not yet available to the public. By tracking insider trading activity, you can get an early indication of a company's financial health. For example, if a large number of insiders are selling their shares, it could be a sign that they are aware of negative financial news that has not yet been released to the public.
(Castellum's insider trading data)
Insider trading can help identify undervalued or overvalued stocks
Insiders are often privy to information that can help them make more informed investment decisions. By tracking their trading activity, you can identify undervalued or overvalued stocks. For example, if insiders are buying a stock that is trading at a discount to its intrinsic value, it could be a signal that the stock is undervalued.
(Strike.Market insider trading data)
Insider trading can help detect potential instances of illegal insider trading
While most insider trading is legal, there are instances where insiders use non-public information to make trades, which is illegal. By monitoring insider trading activity, regulatory authorities can identify potential violations and take appropriate action to enforce securities laws and protect investors.
There have been numerous instances of companies and individuals being accused of insider trading over the years. It would be impossible to name all of them, but here are a few notable examples:
- Martha Stewart: In 2003, the domestic lifestyle mogul was accused of insider trading after she sold shares of ImClone Systems just before the stock price plummeted. She was convicted of obstruction of justice and making false statements to federal investigators, but was not found guilty of insider trading.
- Raj Rajaratnam: The former hedge fund manager was accused of insider trading in 2009 and was eventually sentenced to 11 years in prison for his role in an insider trading scheme that netted him millions of dollars in illicit profits.
- SAC Capital Advisors: The hedge fund was accused of insider trading in 2013 and ultimately agreed to pay a $1.8 billion fine to settle the charges.
- Equifax: The credit reporting agency was accused of insider trading in 2017 after it was revealed that several top executives sold shares of the company just days before it announced a massive data breach. The company ultimately settled the charges with the Securities and Exchange Commission (SEC) for $1 million.
Insider trading information is publicly available
Insider trading information is publicly available, which means that anyone can access it. There are a number of websites and services that provide up-to-date insider trading information for individual stocks. By incorporating this information into your investment research, you can make more informed investment decisions. Look for insider trading information at: https://strike.market/insider-trading
