Insider trades can be a valuable reference point for investors when analyzing stocks. In theory, insiders such as directors, CEOs and chief financial officers are the people who know the most about their companies and should thus be in a better position than the rest of us to know where the stock price could go in the future.
Of course, insider buys and sells are not cut-and-dry buy and sell signals. Insiders might sell stocks for a lot of reasons, including taking profits after an initial public offering or keeping their ownership percentage below a certain amount. In general, insider buys are regarded as a steadier indicator, since insiders are likely to be buying because they expect the share price to increase, though this is not always the case. They could be buying because they want to boost investor enthusiasm or gain more voting rights, for example.
Regardless of the lack of clarity for reasons behind insider buys and sells, these trades can still be a useful factor to consider when conducting due diligence on a company. Let’s take a look at how investors can view and analyze insider trade data on GuruFocus.
Note: Only the open market and private sale transactions are included in GuruFocus insider trade data. Other transactions such as the conversion of derivative securities or the exercise of options are not included.
Stock summary pages
From the GuruFocus stock summary page for a company, you can go to the “Insider” tab to check out data on insider buying and selling history for that specific stock (i.e., Ford Motor Co. (F, Financial)). At the top of this tab, you will find the list of insiders that have made the most trades over the past 18 months (left-hand side) and the volume of shares bought and sold over the past 18 months (right-hand side).
Scrolling down on this page, there are charts showing the number of insider buys and sells over the past couple of years on the left, as well as the volume of insider buys and sells on the right. The charts can help to visually identify how insider buy and sell trends have developed over time.
Below that is the list of historical insider buys and sells, with the most recent at the top. The list includes details such as the insider’s name, their position in the company, the date of the trade, the number of shares bought or sold and the price at which the stock was trading on the day of the transaction.
Insider screens
To search for stocks that have recently been bought or sold by insiders, look no further than the GuruFocus insider screens, which you can find under the “Insiders” tab on the menu banner.
Under the All Insiders screen, you can search for stocks that have high aggregate insider buys and sells. You can further refine your search by choosing to only display transactions that are buys or sells, are trading near 52-week lows, meet a certain minimum share count or were conducted during a certain range of dates.
By default, a certain set of data points on each trade are included in the list of insider transactions, including the company, insider name, position, date, number of shares and the total cost of the transaction. However, you can switch to a different view to see other data displayed for each trade. Other views include Fundamental, Valuation, Profitability and Growth. The Fundamental view includes the returns of each stock over specific times, as well as the industry and price-earnings ratio. Note that some of these views do not include the insider information.
If you change up the search criteria and wish to save your customized view for future use, you can click on “Options” and then “Save Table Fields as New View.”
The CEO Buys/Sells and CFO Buys/Sells screens operate similar to the All Insiders screen, except they only include stocks that were traded by the CEO or CFO.
Insider trends
A popular method to search for stocks that insiders are bullish or bearish on is to look for stocks that multiple insiders have been buying or selling recently. You can do this via GuruFocus’ Insider Cluster, Double Buys and Triple Buys screens.
The Insider Cluster screen can be used to search for the stocks that have received the highest number of buys or sells from insiders over a specific time frame, such as one month or three months.
By default, the stocks are sorted by which ones have the highest number of insider buys. However, this data can sometimes be skewed by individual insiders buying shares in multiple rapid-fire transactions due to certain unique circumstances. For example, if a CEO buys 100 shares in 15 separate transactions, does that really mean more than the CEO of another company buying 100,000 shares in a single transaction?
Thus, users can alternatively choose to sort by the number of unique insider buys, which counts the number of unique insiders buying shares over the selected timeframe rather than the number of transactions.
The Double Buys screen shows stocks that both insiders and gurus have been buying, while the Triple Buys screen shows stocks that insiders, gurus and the companies themselves are buying via a positive share buyback ratio (meaning the company is buying back more shares than it is issuing).
Taking a broader, more macro-focused look at insider buying trends, GuruFocus offers the Insider Trends page, which compares the insider buy-sell ratios to the index prices for the S&P 500 as well as for the individual component sectors of the index.
There are three buy-sell ratio charts for each sector. The chart on the far left is for all insiders, the one in the middle is for CEOs and the one on the far right is for CFOs. Looking at history, we can see that a spike in the insider buy-sell ratio has typically coincided with a good time to buy stocks.
For those investors wanting to use insider trends as just one of many stock screening criteria, there is a section for insiders on the GuruFocus All-in-One Screener. In the insider section, GuruFocus users can add screening criteria for insider, CEO or CFO buying or selling.
