Don Steinmann's Investment Tip of the Week

Don Steinmann's
Investment Tip of the Week

Insider Trading

There are two kinds of insider trading. There is the illegal kind, where someone knows something you don’t, and they go ahead and buy or sell stock anyway. It was that kind of insider trading that put Martha Stewart in prison.

But then there is legal insider trading, when management purchases stock for their own account. They may buy or sell shares in their company, as long as it’s not with knowledge of a pending takeover, or a bad news announcement, etc. People sell stock for lots of reasons. Because they need to pay off a debt, to diversify their investing, to buy a new home. So information about insider selling can be of limited use. But people only buy shares in their company for one reason, they are expecting the stock to go up.

When looking at any stock, it’s a really good idea to find out if there has been significant insider buying. It can often be good news. Management doesn’t know about a particular event to happen tomorrow, but they do know their company better than anyone. To find out about insider buying, you can visit http://www.secform4.com
The Sec Form 4 is the one insiders fill out to notify the SEC about their buying or selling.

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