Tag: insider trading

Stocks with Big Insider Buying

by Fred Fuld III

An insider is an executive officer or a director of a corporation, or an individual or company that owns more than 10% of the company.

When an insider buys stock in their own company, it is usually for a reason. It is usually because the prospects of a company look good and the stock is favorably priced. If an insider sells, it is often the opposite, although sometimes they need to sell to raise cash for various reasons. This is why insider buying is a better indicator than insider selling.

Of course, insiders are not allowed to trade on what is called “insider information”, which is significant non-public information.

However, insiders can invest based on their “feel” for the company. This is where the average stock investor or trader can use this to their advantage, because all insider transactions must be reported to the SEC.

Some stocks have had a substantial increase in insider buying, with several of them in the financial sector.

All of the following stocks have had over a 90% increase in insider buying during the last six months, and they all have a trailing price-to-earnings ratio and a forward P/E ratio of less than 15.

Company Symbol P/E Ratio
Artisan Partners Asset Mgmt. APAM 11.04
StoneCastle Financial Corp. BANX 5.11
TCG BDC, Inc. CGBD 5.61
Finance Of America FOA 0.34
GMS Inc. GMS 14.56
Western Alliance Bancorp WAL 14.02

Happy investing!

Disclosure: Author didn’t own any of the above at the time the article was written.

How to Make Money From Insider Trading Legally

by Fred Fuld III

You may have heard that insider trading is illegal. And it is, un der most circumstances. An insider is a top executive, a director, or a holder of 10% or more of the outstanding shares of a corporation. If an insider gives you information about the company that is not disclosed to the public, and you act on that info to profit from buying or shorting the company’s shares, that is illegal.

However, insiders are allowed to buy shares in their own company, as long as it is reported to the SEC in a short period of time. Also, the purchases and sales that the insiders make is available to the public.

For long term investors, this can be useful information, especially if insiders make purchases, because they usually do so based on a long term horizon. If they sell, it could be for any number of reasons totally unrelated to th company, such as raising funds to buy a house, estate planning purposes, paying for their kids college education, or diversification.

So if you look for the stocks that have has more than a 20% increase in total insider ownership over the last six months, you might find some interesting investment opportunities. All of the following fit that category, plus they ll have price to earnings ratios of less than 15, forward P/E ratios less than 15, and a low price to earnings growth ratio of less than one.

Company Ticker Market Cap P/E
Apogee Enterprises, Inc. APOG 880.84M 11.33
Avon Products, Inc. AVP 772.51M 6.32
Famous Dave’s of America DAVE 41.90M 9.31
GMS Inc. GMS 627.56M 12.22
Hyster-Yale Materials Handlg HY 979.49M 13.4
Koppers Holdings Inc. KOP 381.94M 12.49
McDermott International MDR 1.25B 3.47
Riverview Bancorp, Inc. RVSB 165.13M 10.7
Olympic Steel, Inc. ZEUS 176.46M 3.93

Congressman Accused of Insider Trading Under the STOCK Act

by Fred Fuld III

You may have read recently that New York Congressman Chris Collins has been charged with insider trading, relating to Innate Immunotherapeutics Limited (INNMF) which failed a drug trial.

Once the news was out, the stock dropped by a huge amount. Collins was on the Board of Directors of this company and the largest shareholder.

But wait a minute. Aren’t members of Congress exempt from the Insider Trading Laws? Well that was true, beginning around the time of the Civil War.  However, on April 4, 2012, the STOCK Act was passed and signed into law by President Obama, to no fanfare.

First, what is inside trading? It buying or selling a stock based on news about a company that you become aware of prior to the dissemination of the news to the public. It is illegal.

Members of Congress Now Subject to Insider Trading Laws

OK, so now the STOCK Act. It is the Stop Trading on Congressional Knowledge Act which basic overturned the ability of Congresspeople to freely trade stocks on inside information while being exempt from insider trading laws. The STOCK Act put an end to this governmental bonus.

Details of the STOCK Act:
Answers the President’s Call to Ban Insider Trading for Members and Congressional Staff: The STOCK Act expressly affirms that Members of Congress and staff are not exempt from the insider trading prohibitions of federal securities laws and gives House and Senate ethics committees authority to implement additional ethics rules. The Act makes clear that Members and staff owe a duty to the citizens of the United States not to misappropriate nonpublic information to make a profit.

Increases Transparency in Financial Disclosure Reporting: The STOCK Act amends the Ethics in Government Act of 1978 to require a government-wide shift to electronic reporting and online availability of public financial disclosure information. The STOCK Act provides additional transparency for Members of Congress, legislative staff and other government employees currently required to make public financial disclosures:
• Trade Reporting: requires that Members of Congress and government employees report certain investment transactions within 45 days after a trade.

• Online Availability: mandates that the information in public financial disclosure reports (currently made available on request) be made available on agency websites and ultimately through searchable, sortable databases.

New Ethics Requirements:
• Expands Pension Forfeiture for Corrupt Members: the STOCK Act requires forfeiture of federal pension if a Member of Congress commits one of several corruption offenses while serving as an elected official. Current law forfeits a Member’s pension for conviction of offenses committed while serving in Congress. The STOCK Act expands forfeiture to apply to misconduct by Members committed in other federal, state and local elected offices and adds further federal crimes, including insider trading, for which forfeiture will be required.

• Requires Disclosure of Terms of Mortgages: the STOCK Act will require Members and certain high level government officials to disclose the terms of personal mortgages.

• Bans Special Access to Initial Public Offerings (IPOs): the STOCK Act limits participation in IPOs by Members and senior government employees to purchases available to the public generally.

• Requires Report on Political Intelligence in the Financial Markets: the STOCK Act requires GAO and CRS to produce a report on the role of political intelligence firms in the financial markets.

• Requires Job Seekers to Disclose: the STOCK Act requires that Members of Congress and senior federal employees file a written notification with their ethics office when starting a job negotiation to leave the government.

Bans Bonuses for Fannie & Freddie Executives: the STOCK Act bars senior executives at Fannie Mae and Freddie Mac from receiving bonuses during any period of conservatorship after enactment.