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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 110%.

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 265%.

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?

Greed!

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 . . .

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Rare Insider Buy: Their Company Is Already Soaring

It’s highly unusual for insiders to pony up personal funds to buy shares of their own company when it’s already trading near a multi-year high.

But that’s exactly what two officers just did to the tune of $882,144. Both are awarded free shares as part of their compensation but they wanted more. Now.  

What possible reason would they have for doing this? They know something is up and are convinced the stock is on the verge of an even bigger price move.

Using a proprietary strategy, we targeted that insider buy plus a handful of other compelling stocks with fresh insider purchases. These time-sensitive opportunities are now open to public view – but only until Sunday, August 25.

See Zacks’ hand-picked insider trades now >>
 
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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 $486,000 purchase in March 2014?

More recently, the top insiders have continued to buy. But did they report it on the front page when Edward Christie, CEO of Spirit Airlines, bought 2375 shares in July 2019 after the stock plunged? Of course not.

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 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.

Today’s Opportunity 

Just a handful of stocks currently meet the demanding criteria of our Zacks Insider Trader.

Go ahead and look into the portfolio right now. You'll see live recommendations with substantial upside.

For example, there’s a giant company in a hot industry that insiders are pouring their own money into.

This is exceedingly rare because two directors have put up $882,144 even though the stock is already trading near its multi-year high.

Both of these officers already get shares for free, and yet they suddenly came up with a combined total of almost a million dollars to buy more.

This is an opportunity that’s worth looking into!

Plus, as a bonus for exploring insider opportunities like this, you are invited to download Zacks' Special Report, 5 Stocks Set to Double free of charge. These 5 buy-and-holds balance our more active Insider Trader moves. Each is the #1 favorite of a Zacks expert for its potential to jump +100% or more over the next year.

Important note: Access to the Insider Trader portfolio and Special Report is limited. This opportunity ends midnight Sunday, August 25.

See our insider trades and download 5 Stocks Set to Double now >>

Best,

Tracey

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