The year was 2011. The beleaguered company’s stock soared 15% in a day.
And it was all because of news about a massive wave of stock purchases by corporate insiders.
The CEO bought thousands of shares. So did the finance chief. A pair of board members purchased tens of thousands more.
The company’s blog said the purchases “reflect our confidence in the company’s future and our belief in the potential of the transformation” at hand.
What thrilling words and deeds — until you learn the name of the firm.
It was Eastman Kodak.
Within a year, the once-dominant film and camera company filed for bankruptcy protection.
Beating the Market With Insider Trading
Kodak’s story demonstrates an important point.
If you’re hunting for the next great stock pick, insider trading patterns are a valuable first step. Decades of research make the point repeatedly: “Following the insiders” is a great strategy for beating the market.
But before you spend a dollar buying a new stock, an effective insider trading strategy needs more steps. Someone needs to assess a company’s financial condition, cash flow and profits. What’s the condition of its business operations and competitive stance?
That’s a crucial part of the system developed by Senior Analyst Brian Christopher in our new Tip-Off Trader service. It’s launching in coming days.
Brian is the ideal person to lead a service like Tip-Off Trader. He’s a certified public accountant, a bankruptcy consultant and an investor. He’s analyzed the books of more companies than the rest of us will in a lifetime.
He knows how to spot the growth companies and quality turnaround prospects from other stocks that could just as well “circle the drain.”
Without those extra steps of analysis, you can see how easy it might be for someone with a more “do it yourself” attitude to get themselves into trouble when it comes to insider trading without the research.
That should be a warning for all of us.
You Need a Pro in Your Corner
With interest rates heading higher, the days of “easy money” for speculative stocks are slowly coming to an end. Profitable companies need to earn more to justify their valuations.
So, how to separate the great buys from the potential Eastman Kodaks out there?
Follow the insiders — but do so with the kind of seasoned analysis and number-crunching experience that a pro like Brian brings to the table.
Only then will we find that “extra edge” we need to outperform a stock market that’s getting tougher with each passing day.
Jeff L. Yastine
Editor, Total Wealth Insider