Insider Activity

Another strategy for investing involves looking out for what insiders at a company are doing with their stock. Keeping an eye on insider trades can be useful because it allows you to see what the people who have a large stake in a company are doing with their stock. These insiders are often the ones who know what is going on at the top levels of their company, and so they may have the best information about whether a company's stock is actually worth more or less than the current price. Insiders can be either individuals or corporations. They are required to report both direct holdings (which are held in the name of the insider) and indirect holdings (which are controlled by the insider but are held by a family member, trust, company plan, or corporation with which the insider is affiliated). Note that we're not talking specifically about illegal insider trading (that is, insiders who are trading based on privileged information), but instead about all types of insider trades, including when no such privileged information exists, but the insiders are just generally confident about the company's outlook.