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Follow The Owners… They Might Know Something

Updated: Sep 27, 2022

We’ve all heard the old expression to watch out for the cobbler who does not wear shoes or does not outfit his children with shoes. Would you have him fix your shoes? Or would you buy cake from a baker who does not allow sweets in his house? So, would you buy stock in a company where management does not own the stock? Probably not…

On the flipside, what does it say about a company’s stock when management is net buyers of said stock? Many things have changed over the years, but one thing that stays consistent is that people like to make money… even highly paid executives. When they invest their own money in their company’s stock, this is typically a strong indication they think it’s under-valued or it has a way to grow!

Now, apply this thought to the overall stock market. In this time of despair, where every talking head is doing their best to call the bottom… company insiders are buying their own stock at a level not seen since the last time the stock market dramatically

corrected… 2009. This is not a coincidence. Looking at this chart, there is a clear relationship between when insiders buy at a high level and the S&P 500 Index performance.

For many reasons, poor investor behavior tends to set in during crisis periods such as now. But if you look close enough, there are always signs to remind us that less expensive stocks should be bought, not sold! Assuming you have the timeframe to ride out market corrections, hopefully this current insider buying statistic adds to your resolve to stay invested (if possible, invest more) during these uncertain times.


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