Note: The difference between the average of all insider buys vs. the median return. This suggests that well over half of the insiders performed better than the median of 14.95%.
Our research shows unequivocally you can. Over the last 12 months we tracked 421 insiders that bought $100,000 or more of their company’s stock. We omitted from this 10% owners as we view them more like hedge funds than true insiders. We dont’ look at numbers less than $100,000 because that can be window dressing, simply execs trying to pump up investor confidence.
The average return on these insider buys was 19.80%. The median return was 14.95%. The best return was 285.2% and the worst was -61.77%. This is a volatile strategy though as the standard deviation was 37.72%. During the same time period the S&P 500 Total Return was 9.85%. Following insiders indeed can be a gratifying strategy.
The market struggled on Wednesday after starting the week out strong with Bernanke’s QE comments and Merkel’s EFSF comments. Now, the market is looking at a fairly flat week, moving into the final two days of the week, which have the most data and excitement. We thought we would have a fairly bullish week with funds and market makers wanting to do a bit of window dressing and hold key levels on the market. They are still slated to hold 1,400 on the S&P and 13,000 on the DJIA. Tomorrow, the market, however, will be looking at GDP, jobless claims and getting one day closer to Q2. Where it goes will be strongly based on those results, and we believe good news will send us higher.
The market dipped on limited news with durable goods weaker and crude inventories building, but the news points can easily be outweighed by GDP, QE talk, jobs situation, etc. Yet, the issue we saw is the depth of the sell-off on limited news today. That sell-off does give us a bearish tinge, and we have to now start to look at what can move up or down from here.
We al know this intuitevely, but this really puts it in graphic context.
Thanks.