Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Michael Burry who wrote (4265)	6/16/1998 12:37:00 AM
From: Paul Senior	Read Replies (1) \| Respond to of 78958

Mike: re. insider trading. I am still developing my understanding of how this characteristic relates to value investing. We know there are some fund managers who consider insider buying very important - but what aspects of insider buying and how do they relate to other factors that the managers use? (I often read that buying is more significant than selling, since insiders buy to make money, but they may sell for any number of reasons -- not sure if I believe that, but I'll confine my remarks to buying.) We also know that there are scads of insiders out there buying their stock every day -- yet, not all of these purchases result in profits - either for them or for people (outsiders)following their lead. Some criteria which appear significant are size (ref. Bettis, et. al., "Mimickers of Corporate Insiders Who Make Large-Volume Trades", FAJ, Sept/Oct 1997), where large-volume is at least 10,000 sh.); who is buying (some say if CFO buys, that's better than an associated person who might buy more (ref. articles Indivdual Investor, 2/98); time between purchased date and actual published date (although apparently some evidence that "abnormal returns appear to persist for extended time periods" (ref. Bettis); number of buyers (eg. three or more -- per F. Ponticello of Pru Securities, (Indiv. Investor, op. cit. p.56); insider buying even after the stock has moved up ("that's awesome" -Ponticello). I recall checking all of the picks highlighted in that article, about 3 months later-- I was not impressed with the stock performance results. Unrelated to the articles, I've also found out that some companies (one REIT I was following) pay or subsidize their execs to purchase directly. (That would nicely mislead outside investers -g-) That all said, I am buying or have bought into some companies which concomitantly have insider buying - some heavy or persistent. This includes: Midway Games (MWY), SWR, RDO, TCMS, LTV, WES, MMO, UC and some others. I may not make any money (after all, I've been wrong many, many times before), but from what I can tell, if I go down, there are a bunch of insiders here who will lead the way. That gives me some comfort to hold on as these stocks 'seek their support levels' -g- Paul. (And I own a bunch of stocks where there's insider selling too -- some of these are up and some are down)