One of the best ways to spot potential opportunities is by tracking insiders.
After all, who knows the company better than an insider – the CEO, CFO, COO, officers, employees, and directors? If they’re buying a sizable number of shares, it’s often a good idea to start looking into why and perhaps follow them into the stock.
That’s because they’re typically privy to information on new products, competition, and the operating environment of the firm. We have to consider that insiders who are buying their stock wouldn’t put up their own money unless they believed the move would be profitable. Of course, it’s not always wise to base your own buying decisions solely on the actions of insiders.
Look at Transocean (RIG), for example.
Chairman Chad Deaton just paid $222,000 for 30,000 shares of RIG for about $7.40 a share. According to Barron’s, “His purchase of Transocean stock hints at confidence in the outlook because Deaton paid a much higher price than for his most recent previous open-market buy.”