Free Insider Trading Stock Information

This article discusses free insider trading stock information. While automotive officials were making brave and uplifting speeches about industry prospects, they were selling off stock in their own companies. When insiders like auto executives won't leave their money where their mouths are, that's worth knowing about. See insider trading for more information.

How to interpret insider action:
Insider selling: This is not as reliable an indicator as insider buying. Reason: There are all kinds of personal reasons why an insider might sell shares. However, if there is consistent insider selling, and only selling, it may be an early warning sign of poor performance. Example: One California-based computer company's troubles didn't become apparent until some 18 months after considerable insider selling had been recorded.
Insider buying: It has a definite correlation to stock performance if it occurs in the open market rather than as a result of exercising options or warrants or as part of a profit sharing plan. (However, if insiders are exercising those options, it reflects some optimism about the company.)

Watch for: Three or more insiders buying within a short period of time (several weeks). This often indicates that there are merger talks being conducted. However, it is not a confirmation of a takeover. Consistent inside purchasing by officers, directors, investment advisers and other affiliated groups means confidence in strong earnings potential and, therefore, a stock price that is higher.
Note on volume: Ignore small purchases or sales (100 to 200 shares), unless they happen on a very frequent, consistent basis.

Big block purchasers: The Securities and Exchange Commission (SEC) requires individuals or firms that acquire 5 % or more of another company to state their purchase and purpose in a 13-D statement and record all additional purchases. Although 90 % of the time the purchasers claim to be buying for investment purposes, it is frequently a first step toward a tender offer or merger. Even if a tender offer is not made, these investors usually do not buy into a company unless the underlying fundamentals warrant it.

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To find out where insiders are placing their bets, you can follow their activities by using the SEC's Official Summary and newsletters, such as The Insider:SO Chronicle. Both publish data three to six weeks after actual insiders' purchases or sales are made. (The filings themselves are made 10 days after the insider trade.)

Now we will discuss How To Make Money On Takeovers. Short of consulting a crystal ball, the best way to tell if a company's a possible takeover target is by watching the buying patterns of investors with top track records. We track SEC 13D filings.
They're required within ten days of a purchase that brings an investor's holdings to 5 % or more of a company's outstanding stock. That's not to say you should blindly follow.

You must also analyze the company's balance sheet and market position.
When calculating a company's book value to compare it with its market value, research its adjusted book value-including assets that don't show up on the balance sheet (find them in annual report footnotes) ... most commonly, an overfunded pension plan or Last In-First Out (UFO) inventory reserves. Reasons: Spectacular rises in the stock and bond markets have boosted dramatically the funds held in pension plans ... and if a company uses UFO accounting procedures, its inventory is usually worth more than stated on the books.

Valuable insight can also be gleaned from an examination of the company's securities portfolio, also listed in annual report footnotes. Question: Is the portfolio's market value higher than its stated book value?
It's also important to take a look at the market value of a company's real estate holdings. Where to find them: The company's Form WK, filed annually with the SEC and available from the company's investor relations department.
You'll have to research land values in the area ... and will usually discover that the value of the property is higher than stated on the company's books. Finally, find out from its annual report whether the company has a tax-loss carry forward that might benefit another party.

In addition to hidden balance-sheet assets, you need to know how the company is faring within its own industry. How: By comparing its price/earnings ratio with PIE's in the rest of the industry and with the general market. That gives an idea of whether it's fairly, over- or undervalued. Best: Undervalued.
Next area to investigate: The company's market share or penetration in its industry. Is it a major player or an also-ran? Always go for the major players.

Source: Consumer Information Center

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