Two Minutes Reading for the Smart Investing Strategy
Have you ever wondered what company executives know that you don’t? When the people who run a company—like the CEO, CFO, or a board member—buy shares of their own company’s stock, it’s called insider buying. 💰
This isn’t the shady, illegal “insider trading” you hear about in movies. This type of buying is perfectly legal and publicly reported.
Why It Matters 🤔
Executives have a front-row seat to the company’s daily operations, future plans, and financial health. They see everything.
While there are many reasons someone might sell shares (buying a house, paying taxes, diversifying), there is usually only one reason they buy them: they believe the stock is undervalued and will go up. 📈
A single small purchase might not mean much. But when you see several insiders buying large amounts around the same time, that’s called cluster buying. It’s a strong signal that the people who know the company best believe in its future.
Real-World Example 🔍
After periods of poor stock performance, companies like Lennar (NYSE: LEN) have seen notable insider purchases from their leadership. These moves were read as a vote of confidence in the company’s long-term health—suggesting that even if the market was down on them, insiders saw value ahead.
A Useful Input, Not a Guarantee
Of course, insider buying is not a crystal ball. Executives can be wrong, and stock prices don’t always follow. But for everyday investors, insider buying is a valuable input.
It’s a signal worth noting—one that can prompt you to dig deeper into fundamentals like earnings, debt, and competitive position before investing.
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