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When "Insider" Greed Is Good

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What do Elon Musk and Mary Dillon 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 are up over 231%.

But who is Mary Dillon?

She's the President and CEO of Ulta Beauty, a cosmetics and beauty product retailer with stores across the United States.

The CEO of Ulta bought nearly a million dollars' worth of shares on the open market in March 2014 and September 2014.

Since the March 2014 purchase, shares are up 97%.

Clearly it is beneficial for investors to follow insider buying activity. Digging below the surface to find the obscure purchases by folks like Mary Dillon is where the big rewards can be found.

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 of shares already?


Pure and simple.

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

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???

Continued . . .


9 Insider Buys to Follow Right Now

Zacks distills a small number of insider stocks that meet high standards for earnings and valuations.

For example, just this Friday afternoon, we posted a trade with exceptional promise. It is a "Cluster Buy" in which the Chief Accounting Officer, CFO, and CEO all poured in their own money amounting to a total of nearly $2 million. They did this in spite of the fact that they are already awarded shares as part of their compensation, another telling signal.

Recommendations such as this are normally closed to public view - but you can gain access to it and 8 other insider stocks until midnight Sunday, November 12.

See our best insider trades today >>


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 huge insider buys like Elon Musk's $100 million purchase, did you hear anything about Mary Dillon's $475,000 purchase in September 2014?

More recently, the top insiders have continued to buy. But did they report it on the front page when Charles Swoboda, CEO of Cree, bought 10,000 shares in October 2016? Of course not. Yet Cree is up 56% since that purchase.

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 Best 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 have been known to buy en masse. Then what's an investor to do?

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.

That August, insiders bought stock in 50 different S&P 500 companies in just one week. Even if you got a list of those stocks, how would you narrow it down to the stocks that were 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 excellent valuations. We do the work of sifting through all the insider buys so you don't have to.

Just a handful of stocks meet the demanding criteria of Zacks Insider Trader. Right now, we've narrowed it down to 9 insider buys that make the grade.

One of these recent moves was by a CEO who - for the first time - poured his own money ($238,800) into his company's stock. This was despite having already received over $7 million worth of the stock as part of his compensation, yet another compelling signal.

Another trade, posted this Friday afternoon, is a very intriguing "Cluster Buy" with the Chief Accounting Officer, CFO, and CEO all jumping in to the aggregate total of nearly $2 million.

Time to Follow Those Officers and Load Up on Shares

Today you are welcome to see our selected insider trades with exceptional gain potential. Start now and as an added bonus you may download our latest Special Report, 7 Best Stocks for the Next 30 Days free of charge. From 220 Zacks Rank #1 Strong Buys, these are the 7 that our experts predict will break out the soonest.

Important note: Access to the Insider Trader portfolio and Special Report is limited. This opportunity ends Sunday, November 12.

See Zacks Insider Trader and 7 Best Stocks for the Next 30 Days now >>



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

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