It’s something mutual fund legend Peter Lynch once described very succinctly: “There are many reasons why insiders sell, but only one reason insiders buy.”
That reason being, of course, that insiders know something about their company that they are certain will drive the stock price higher.
And research bears this out.
According to Nejat Seyhun, a professor and researcher in the field of insider trading at the University of Michigan, whenever you have insider buying, the stock tends to outperform the total market by 8.9% over the next 12 months. (more)
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