01-02-2016, 10:01 PM
Insider buying isn't a guarantee for higher stock prices (management can be too optimistic, or plain wrong, or if their optimism isn't shared by fund managers the stock will go nowhere) but it's interesting nevertheless. Here are five of them:
Corporate insiders sell their own companies' stock for a number of reasons. They might need the cash for a big personal purchase such as a new house or yacht, or they might need the cash to fund a charity. Sometimes they sell as part of a planned selling program that they have put in place for diversification purposes, which allows them to sell stock in stages instead of selling all at one price. Other times they sell because they think their stock is overvalued and the risk/reward is no longer attractive. Some even dump their own stock because they have inside knowledge that a competitor is eating their lunch and stealing market share. But insiders usually buy their own shares for one reason: They think the stock is a bargain and has tremendous upside.