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We love it when a famous CEO buys a large chunk of his company's stock.

In 2013, Elon Musk, the CEO of Tesla, bought over a million shares of Tesla stock for $100 million even though he already had plenty of shares. It made headlines.

When Elon Musk bought, he was the only insider at Tesla buying at that time.

But what about when non-famous insiders buy their company's stock and when a bunch of them buy en masse?

This mass insider buying behavior is called a "cluster buy" and it is the strongest signal you can get in insider trading.

When one insider buys, he might be considered an optimist, but when three or four insiders all buy at the same time?

Now that's a powerful consensus.

But you're not going to hear about the cluster buys from the media. There aren't going to be headlines trumpeting the buys of a few corporate Directors and a CFO.

Nope. The cluster buy simply isn't glamorous enough.

Investors therefore have to dig below the surface to find the insider cluster buys. But once you do, that's where big rewards can be found.


Cluster Buying Sends the Strongest Signal

Why do insiders spend so much of their money on their own companies' stock when they already own a ton of shares already?

Greed!

Pure and simple.

The opportunity to make more money motivates people -- even people who are already well off like highly paid CEOs and CFOs.

When insiders buy in a cluster, it's because they all 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 all very confident that shares will be on the rise.

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Massive Insider Opportunity About to End

Suddenly, 3 high-ranking insiders bought nearly 30,000 shares of their company just a few days ago. They already receive stock options as part of their compensation, but they're scooping up even more. This kind of "cluster buy" can only mean one thing:

These "in-the-know" expect a major price jump.

Don't miss your chance to make the most of this and a selection of other compelling opportunities. Check Zacks' insider portfolio before it closes to public entry Sunday, May 21.

See insider trades now >>

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After all, who would buy more stock in a company if they knew it was sinking? And why would there be several of them buying unless they didn't collectively believe that their stock was a value?

When things at the company are THAT good, insiders don't want to miss out when everyone else is cashing in. Call it insider peer pressure, if you will.


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 tout the huge insider buys from celebrity CEO's like Elon Musk's $100 million purchase, you'll almost never hear about the non-celebrity CEO's, or other top ranked officers when they buy their stocks.

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 Cluster 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 daily list. Have you ever seen one of those lists? The sheer number of companies can be overwhelming.

And those lists don't usually separate out the cluster buys, which sometimes take place on different days in the same week. For example, if you're getting daily insider updates, you may not realize that the CEO bought on Monday but three Directors bought on Tuesday. You may pass by those 'hidden' cluster buys without even realizing it.

Even if you got a list of the cluster buyers, how would you narrow it down to the stocks that are truly worth buying? If I'm going to buy when the insiders are buying, I want to buy only their top picks.


Picking the Best Insider Buys

To distill the most meaningful, most promising signals, Zacks research team developed a strategy that monitors selected insider buying activity at companies that already show strong earnings and valuations.

Today only 12 stocks meet the demanding criteria of our Insider Trader portfolio. One of them is an exciting new cluster buy. Three high-ranking officers -- including the CFO -- bought nearly 30,000 of their company's shares a few days ago.

All 3 of these insiders already receive stock awards as part of their compensation. But they're still eagerly grabbing more shares on the open market. They clearly see price going up, and so does Zacks.

You are welcome to share this and 11 other insider trades with impressive gain potential. But please be aware that we must limit access to these stocks. Entry to our portfolio closes to new investors Sunday, May 21.

See Zacks' Insider Stocks Now >>

Best,

Tracey

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




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