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Weekend Wisdom

'Buy when everyone is selling.'

How many times have you heard that as stocks are plunging?

I don't know about you, but it's easier said than done.

But there's one group of investors who charge in to buy when stocks are selling off: the corporate insiders.

How do they do it?

They have 2 key advantages over you and I that provide them the edge during uncertain times. If you follow their lead, you can have that edge too.


Two Key Advantages Give Insiders the Edge


1) Key Advantage #1: Insiders Have Information

Everyone knows that information is power.

Who knows more than those who are actually running the company?

The corporate insiders, the CEO, CFO, General Counsels and even the Head of Human Resources know who is getting hired or fired. They know that last month was a record month for sales and that there is a new factory opening in China, which hasn't been announced publicly yet.

Even better, they can actually purchase their company's stock, knowing all this information, and it's perfectly legal.

When corporate insiders get excited about their company's prospects, you should too.

More . . .


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2) Key Advantage #2: Insiders Know When to Buy

Insiders don't buy their own shares willy-nilly. As a stock rallies, insiders are likely to stay on the sidelines because their stock is no longer cheap.

Insiders like bargains just like the rest of us.

That's why during this recent bull market over the last 16 months, the number of insiders buying has fallen compared to the selling. Just like you, the insider doesn't want to buy an overpriced stock.

But when the company stock sells off, especially in a short period of time, the insider sees it as an opportunity. The insiders want a deal.

This is what happened in August 2011 when the S&P 500 plunged from its April high. In the first nine days of August, 919 insiders at more than 100 different companies jumped in to buy their companies' shares. It was the largest amount of insider buying since the market bottom in March 2009.

Were they right?

Just six months later, the S&P 500 had rebounded over 15%. Stocks never looked back from that sell off and the S&P has gone on to make dozens of new record highs since then.

And the insiders cashed in.


Are the Insiders About to Jump In Again?

The NASDAQ is down nearly 10% from its recent highs. This is the largest pullback in the NASDAQ in three years.

And some individual stocks have seen an even more significant pullback. Within the NASDAQ 100, 29 of those 100 companies have seen their share price fall more than 20% from their highs.

As we've seen, the insiders like to buy when there are dramatic sell offs. When everyone else is selling, they see a bargain. Remember, they have knowledge of what is going on inside the company so they are more optimistic than the rest of us.

Just like in 2011, 2014 is turning out to be an opportunity for insiders.

I'm expecting to see a deluge of insider buying. They love their deals and there haven't been many chances like this in the last few years.

Are you ready to follow their lead?


Where to Find the 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.

When the insiders step in to buy en masse, it can become even more overwhelming with hundreds and hundreds of insiders buying at countless numbers of companies. Imagine trying to figure out which of those companies you should be 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 Zacks' Insider Trader. And right now, we have narrowed it down to 7 insider picks that make the grade.

You are welcome to share these current insider trades with explosive gain potential, but access must be limited. Please note: Entry will close to new investors Saturday, April 19, 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 12 other Zacks' portfolios for one month at a total cost of only $1.

Learn more about the Zacks' Insider Trader >>

Best,

Tracey

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



Zacks Investment Research

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