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Pay attention to insider buying and selling from "summary" of One Up On Wall Street by Peter Lynch,John Rothchild
When it comes to finding winning stocks, one useful strategy is to look at insider buying and selling. Insiders are people who have access to confidential information about their own companies, such as executives, directors, and large shareholders. By paying attention to their actions in the stock market, you can gain valuable insights into the company's prospects. Insiders are required by law to disclose their trades, so this information is readily available to the public. When insiders are buying shares of their own company, it's usually a positive sign. After all, they wouldn't be putting their own money at risk if they didn't believe the stock was undervalued or had strong growth potential. On the other hand, if insiders are selling their shares, it could be a red flag. They may know something that the general public doesn't, such as upcoming problems or a lack of growth opportunities. Of course, not all insider trades are created equal. Some insiders may simply be diversifying their portfolios or selling for personal reasons. That's why it's important to look at the context of the trade. For example, if a CEO who has a history of making profitable insider buys suddenly sells a large chunk of his shares, that could be a cause for concern. On the other hand, if a director who has never bought or sold shares in the past suddenly buys a significant amount, that could be a bullish signal.- While a large purchase or sale could indicate strong conviction one way or the other. Insider buying and selling should be just one tool in your investment toolbox, alongside other fundamental and technical analysis. By combining all these tools, you can increase your chances of finding winning stocks and beating the market.
