The Importance of Insider Buying Tuesday, June 11, 2:26 PM ET
There's an old saying on Wall Street, that there are many possible reasons for an insider to sell a stock, but only one reason to buy -- they expect to make money.
The officers and directors of a company tend to have a unique insider's view of the business, and presumably the only reason an insider would choose to take their hard-earned cash and use it to buy stock in the open market, is that maybe they find the stock very undervalued, or maybe they see exciting progress within the company, or maybe both. So when stocks turn up that see insider buying, investors are wise to take notice.
A particularly strong insider buying signal is what we call a "cluster-buy" where three or more different insiders make open market purchases within a short period of one another.
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