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Weekend Wisdom

What do Elon Musk and Michael Babich have in common?

Both are CEOs who have bought shares of their own companies just before the share prices moved higher.

You have probably heard of Elon Musk, the CEO of Tesla. In 2013, he made a big statement by buying over a million shares of Tesla stock for $100 million even though he already had plenty of shares. Musk went out on the limb even further, as he had to borrow the money from Goldman Sachs to buy the shares. He used his previous holdings in Tesla, and stakes in other companies, as collateral. Since then, shares of Tesla have doubled.

But who is Michael Babich?

He's the President and CEO of Insys Therapeutics, a pharmaceutical company which makes supportive care products that assist cancer patients.

The CEO bought shares of Insys on the open market in June 2013 and again in August 2013.

Over the last six months, shares have moved up +217%.

Clearly it is beneficial for investors to follow insider buying activity. But digging below the surface to find the obscure purchases by folks like Michael Babich is where the big rewards can be found. Read on to learn how to do this on a regular basis.


Insider Buying Sends a Strong Signal

Why would these two CEOs spend so much of their money on their own companies' stock when they already own a ton shares?

Greed!

Pure and simple.

The opportunity to make more money motivates people - even people who are already billionaires like Elon Musk.

More . . .


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5 Insider Stocks to Buy Monday Morning

A brand-new Zacks strategy is about to post 5 stocks with significant insider buying activity. Yet, its signals are flashing not only because officers and substantial owners are buying up shares out of their own pockets.

These companies are also meeting the strategy's unique standards for strong valuations and Zacks Rank timeliness. The opportunity for explosive gains is now exceptional. Please note, however, that this portfolio will be sealed from the public Sunday, January 26.

Be first to see these insider stocks >>

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If top insiders are buying, it's because they know something very good is going on at the company. Maybe it is a new product. Or contract. Or pending merger. Whatever the reason, they are very confident that shares will be on the rise. After all, who would buy more stock in a company if they knew it was sinking???


Buy When the Insiders Buy

When high level insiders buy, they are required to report the purchases to the SEC within 48 hours of the trade. The trade then becomes public information.

Hedge funds and other professional investors routinely use this information to get an edge on their trades.

For most of us, though, it's not easy to get access to the insider information. While the media will trumpet huge insider buys like Elon Musk's $100 million purchase, did you hear anything about Michael Babich's $24,890 purchase in August 2013?

The challenge is getting easy and reliable access to all the insider trades and then figuring out which ones to buy.


Where to Find the Strongest Insider Buys

Anyone can go on the SEC website and get the insider trading information, but it's time consuming to search by individual companies.

Some investment firms collect the insider buying data and can provide it to you as a weekly list. Have you ever seen one of those lists? The sheer number of companies can be overwhelming.

In some instances, the insiders also buy en masse. This happened during the stock market dip in August 2011. As stock prices fell, insiders felt that their companies were undervalued and rushed out to buy shares.

From Aug 3 through Aug 9, 66 insiders bought stock in 50 S&P 500 companies. Even if you got a list of those buyers, how would you narrow it down to the stocks that are truly worth buying?

To solve this problem, our Zacks research team developed a strategy that monitors selected insider buying activity at companies that already show strong earnings and exciting valuations. Only a handful of stocks meet the demanding criteria of our new Zacks Insider Trader.

This Monday morning, the first 5 insider stocks with explosive gain potential will be posted for the portfolio. You are welcome to share them, but access must be limited. Please note: Entry will close to new investors Sunday, January 26 and possibly sooner due to what has already been extremely high demand from the Zacks community.

In fact, right now you can gain access to our Insider Trader and 13 other Zacks portfolios for one month at a total cost of only $1.

Learn more about the new Zacks Insider Trader >>

Best,

Tracey

Tracey Ryniec is Zacks' value strategist and is the Editor in Charge of our new Insider Trader.

 

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