Why is Insider Trading Valuable?

Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise
- Peter Lynch
This quote from Peter Lynch, one of the most successful mutual fund managers who ever lived, sums up the value of insider trading. Insiders buy shares because they believe the price will rise. This is a strong indicator that the price will rise. Insiders are also more likely to have access to information that is not available to the public. This information can be used to predict the future price of a stock.

What are Insiders?

Insiders are those who have access to non-public, material information about a public company. This includes company executives, Congress members, and institutional investors as 10% owners of a company. Insiderviz gives you the trades and holdings of all 3 groups.

Isn't Insider Trading Illegal?

No, insider trading by company executives is legal as long as they report their trades within 2 days to the SEC. Insider trading is illegal when insiders don't meet these SEC rules and trade, or share to others to trade, based on non-public, material information. Now insiders, even when following the law, always have more information than the average investor. That's what makes their moves an important indicator.

Where Does Insiderviz Get This Data?

Insiderviz gets all of its data from the SEC or the Congressional Archives themselves. The SEC makes all insider trade filings (form 4) public when they are filed. We take this data from the SEC's apis, save it to our databases, then send it down to you.

How Do I Use The Data?

Insiderviz is a tool for value investors. Insider trading is one of many indicators investors should check before investing in a company and can help signal when a company is undervalued. Insiderviz is not a buy or sell signal. We recommend using insiderviz in conjunction with other indicators such as price to earnings ratio, price to book ratio, and price to sales ratio. At the end of the day insiderviz is not financial advice. It is a tool to help you better understand the companies you plan on investing in.

Why Is There More Selling Than Buying?

Company executives receive stock as part of their regular compensation. There is no trade being made, they receive shares usually through restricted stock units or options plans. Therefore, lot of insider selling is routine, just taking in their compensation. Whereas, insiders buying are using their own funds, that is why insider buying is seen as more important than insider selling.

Insider Trading Rules for Congress vs Company Executives?

Insider trading regulation for company executives is much more strict than for Congress. Company executives need to file within two days of the trade, reporting the exact share and price amount. While Congress needs to file within 45 days of the trade, reporting only total amounts in set ranges.

What are Institutional Investors?

An institutional investor is a company that manages money on behalf of clients. These include hedge funds, mutual funds, endowments, large asset managers, and more. The SEC requires disclosure of institutional investors' equity holdings every quarter for managers with at least $100 million in assets under management(AUM) in the Form 13F. This gives us a snapshot of their holdings 4 times a year. They usually show up as 10% Owners.

Academic Research

Multiple studies have concluded that cluster buys of insider trades will produce abnormally large returns over the S&P 500. Read more here: Corporate governance and insider trading (MIT)