Insider Purchases: Tell Tale or Tall Tale???

Arguably, one of the most disputed phenomenon in stocks is when to buy and when to sell. Every investor and trader is on a quest to "figure it out". Most will often claim that technical analysis, fundamental analysis, charting, CanSlim, and a million other techniques will tell you or at least give you a clue about when to buy or sell a stock. But what about following Insider activity? Why not take a peek and see if someone in the company or a mutual/hedge fund is snatching up shares? You can! But is it always accurate? That is a harder question to answer.

Think of it this way. When I first saw Sterling Construction (STV) at high 10's, low 11's (way before I started the blog) I looked at the chart, and the company's fundamentals and saw an instant winner. The company just looked good. Plus, I also knew that the government would be issuing the "highway bill", and I noticed that this company builds highways in Texas and some other states. I'll tell you what I didn't see. I didn't see ANY recent insider buys (or sells for that matter). There was no insider clue as to the stocks future upward movement. Well there was ONE thing. I noticed that it did have some Company Insider ownership (around 20% or less). I'll talk about Insider ownership another time. The point is, you can't rule out a stock just because there aren't any recent insider purchases. If I did that, I would have totally missed CNX, STV, CNQ, TLM and many others. But what if there is insider purchases? Well they better be of a great amount, otherwise don't even waste your time looking at the stock. That is because some company insiders will buy some of their stocks, (especially if each insider only bought $10,000 or less) just to make it look good on paper. They are trying to attract halfwitted traders or investors to a stock that basically sucks. Once they have more volume and momentum and the stock actually rises, the insiders usually quickly dump without even issuing a warning, leaving somebody to hold the bag.

So what are we looking for? What insider buy sign is often a bullish indicator? Well, personally I'd like to see an insider (each insider) purchase at LEAST $30,000 worth of stock if not more. If several insiders each purchase $30,000 worth of stock, that's even better. I will practically not even look at a stock if I see ONLY one insider purchase $30,000 or less or even several insiders (like 2-3) who purchases $10,000 each. That is just pure B.S. and an attempt at stock price manipulation. NOW before anyone thinks that this "idea" is pure B.S. hold on a minute. The whole idea is, the more stocks and the more money an insider (or insiders) puts into a stock, the more likely a stock will rise. That is because we generally believe and accept the fact that company insiders are in "the know" of a company since they work there and are part of a companies daily functioning. They will know if a company has some great news about an upcoming product or service that will drive the price up. Believe me, insiders want to make money off of their stock. So in my opinion, any amount of stock that is purchased under $30,000 is less likely to be something concrete. That is my standing. Think of it this way, would you have been more confident that CHK's price would rise over $15 if one company insider purchased $30,000, and another bought $20,000 worth of stock? Or would you feel more confident if one insider purchased $200,000 worth and another purchased $1,000,000? Yah, I think we know the answer. On a final note, I'm not saying that a company stock with only several insiders buying $30,000 or less worth blocks cannot be a run away hit. I'm only saying that you have a better chance and bet with a stock packing more insider buying punch. That's all. I'm just trying to get you to look at stocks that are more worth your time than others.

Now here comes the fun part. We will try to look at several different stocks in different industries that I have found with pretty decent to extraordinary insider buys. I will throw in a couple of "duds" to show you which stocks you should bother with. Alright? Lets go!


Okay I got a few to start you off as I finish researching the others ones.

The First Industry group is the Finance- Reit (Residential Investment trust) group

The stocks that I like in this group are:

Global Signal (GSL) total # of shares bought = 17,790,961 shares (estimate). Total value of stock purchased = $464,547,007 this is from 5/05-now

GSL has a 52wk hi of 47.11 (9/9). On average, GSL trades 173,000 shares On 9/9 it traded 379,000 which is roughly a little over double the average volume. This is probably due to some profit taking from individual investors and company insiders as well. Who could blame them? If I were them, I'd take a little off the table as well. Regardless, wait for the selling to cool off. Keep an eye on the price. When it drops to a price level (ex. 45.60) that you are satisfied with, then you buy

Essex Property Trust (ESS) total value of stock acquisitions= $ 3,131,000

Arbor Realty Trust (ABR) total value of stocks purchased in August = $ 13,909,001

Capital Trust Inc (CT) total value of stocks purchased = $1,237,501


another one in this group is:

Wellsford Real Properties (WRP) total value of stock = $5,301,501
the only difference is that WRP trades on the AMEX market.

One should take a look at the Retail- Restaurant group, where I found 2 stocks with equally great potential and insider purchases. The stocks are:

Pizza Inn Inc (PZZI) has bought stock at a total $504,066. Insiders purchased a total of 193,189 shares of PZZI's stock.

Mexican Restaurants Inc (CASA) $669,501. Shares accumulated and bought by insiders total =110,000 shares of CASA.

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You know, its that time again. You may be thinking, "what time?!". I'm talking about X-Mas time! The X-Mas shopping season is coming up. People are going to give retail a huge boost! I'm going to give you 2 stocks that I believe are poised to rise now and even at X-Mas time. These 2 stocks were chosen just on insider purchases alone. Of course I have mentioned other stocks that will benefit at X-Mas time, such as SFP, GLW, AAPL...etc.

Sharper Image Corp (SHRP) has some insider activity. Just in the end of August and September alone, company insiders purchased 22,000 shares of stock, worth around $285,800. I know its not an awful lot, so if you are interested in buy some SHRP, just buy a little. I would say no more than 800 shares. SHRP is currently trading at 13.34 (9/9). It's 52wk high is at 23.83 (which it is considerably off of). SHRP is actually very close to its 52wk low of 11.16, which is probably where it has bottomed. No wonder insiders started buying, lol they are not stupid. This is easy money, folks! SHRP is also very close to average volume. Avg. volume is 216,000 sh a day and volume on 9/9 was 211,000 shares traded.

Party City Corp (PCTY) is another retail stock to keep an eye for because of significant recent insider buying. In this case, the insider purchases were by mutual funds (maybe hedge funds?). Insiders bought around 837, 654 shares of PCTY valued at $11,758,686. This includes all insider buys from 2/05 - present.

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Of course I have to include a stock that is in the Energy sector! Again this is a recommendation for an Energy stock based only on insider buying activity. There are of course, a ton of great energy plays that have no insider buys and yet they are making 52wk highs. Oh and I am not going to mention Chesapeake Energy (CHK)! CHK is still a buy, but I have already profiled it (and so has everyone else and their mother).

Centerpoint Energy Inc (CNP). CNP is in the Utility-Gas Distribution industry and is looking very strong as an attractive, technical play. Recently, a director (what's up with all these directors buying?) purchased 20,000 shares, totaling $292,000. Yeah, I know this is not a lot of insider purchases, but still I believe in the upcoming days, you will see more insider buying in CNP. And even if there isn't I still feel strongly that the price will rise nicely! Gas is a profitable commodity right now, so seize the moment and don't forget to seize the stock! CNP is at 14.64 (9/9).

PetroQuest Energy (PQUE) is another little stock that you should have a slice of. PQUE, like CHK, is in the Oil and Gas- U.S. Exploration and Production Industry. I've had this little stock on my radar since it was no more than $6. I didn't get to buy it at that point, but now I have it on my radar again. Especially since there have been some insider buys. Just recently in the beginning of September, company insiders have purchased 70,000 shares of stock. This amounts to roughly $540,000 worth of stock. I expect more purchases as the stock continues to hold onto the $8 range. If you want, buy a little... 150-500 shares for the long run should be fine.

I also like Matrix Services (MTRX) because of its insider purchases. What I don't like is the fact that the insider buys were in the $4 range and the stock is now trading over $8. That is a double that we missed. Is there a chance that the stock will go higher? Hell yeah! But is it worth it? I'll let you decide that. If anything, keep MTRX on your radar and buy it if you'd like. Just keep an eye out for a huge surge of volume on a day that the stock opens up positive. We will learn how to average out volume for key stocks later on.

I'll give you an example of what I am talking about. What we want to see is the average # of shares a stock trades (for example, CHK) at any given time during the day. For instance, say CHK trades 2 million shares a day. We want to find out what the average amount of shares are for lets say, 10am. We would look at the stock during that key time ( on a daily basis) to plot down the amount of shares traded at that given time (10am). After a few days (or weeks) of doing this, just average it out. Now you know how many shares that stock trades ON AVERAGE on any given day at 10am. This way, if there is a day that the stock opens up nicely and you have a significant amount of volume over the average volume, the stock will perform rather well for the rest of the day. You can also use this technique on down days as well. This is just a theory that I want to test out when I have the time. Feel free to test it out yourselves and let me know your results!

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Arguably, one of my favorite sectors is the health/medical sector. More specifically I like Bio-tech and Bio-pharmaceutical companies. So that's why I found a couple of interesting ones.

I like Xenogen Corp (XGEN) at 3.31 (9/9). Maybe that's because BOTH company insiders and institutions have been gobbling up shares since the summer. In the past few months, insiders have bought around 3,618,850 shares of XGEN. That's $10,544,301 worth of stock! Nice!

The next few companies that I will mention have had insider purchases (some spanning in 2004) and are performing at or near their 52wk high.

Conceptus Inc. (CPTS) at 11.47. It is in the Medical-Products industry. Insiders have bought 146,000 shares, valued at $1,178,301. If you want to buy, buy 200-700 shares tops.

Cerus Corp (CERS) is in the Medical-BioMed/Bio-Tech sector. It is trading at 7.63 and is one of the top stocks (out of over 250 stocks) in its industry. Insiders have bought over 100,000 shares, valued at over $310,000. Don't go too crazy with it. If you want, buy 1000 shares max.

Durect Corp (DRRX) is another small Bio-tech company also at its 52wk high 7.43/7.00. DRRX is also a top Bio-tech play that is attractive both fundamentally and technically. Insiders have bought 203,000 shares valued at $531,500. Not bad!

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When most people think of Bank stocks, they quickly conjure up an image of a boring, old, slow moving stock (like Citigroup, lol) that hasn't moved more than a point or two in ages. It's true, most bank stocks are boring stocks with no growth. Big headed brokers at firms like to call these "value stocks". I like to call them a "big, fat waste of my time and money stocks". So don't expect me to ever recommend a boring bank stock, except for a couple of RARE ones that are in a high-growth REGION. Banks that are in relatively new, hot housing markets such as certain parts of Florida (Ocala, etc) are part of the Banks- SouthEast Industry still have some growth left in them, unlike NorthEast banks. There are quite a few of them that caught my attention, but I'll just mention a couple.

First Citizens Bancshares (FCNCA) is a monster weighing in at $166 a share. Believe me, its worth every penny. This banks 2Q earnings were up over 89%! Now that's what I call growth! Also, with no real analyst coverage and opinions, this stock is let loose to run wild! It basically will not have the earnings fear that most stocks experience prior to earnings time. It is my opinion that this stock is going to hit $200. It is still CHEAP at $166! That's why there are still insiders buying, even now! Insiders bought 6,650 shares for a value of $1,036,368 for August and the beginning of September alone! Of course with a high priced stock, buying a lot of shares is difficult so I will set the maximum between 25-100 shares.

Nara Bancorp (NARA) is another good looking bank stock. NARA is currently trading at 14.98. What caught my attention with NARA is that a company insider just recently (while the stock was at 13.88) around 1,440,920 shares, valued at over $19,999,969 in one shot! Lol. This guy is either crazy or he knows something we don't. If he's wrong and lets say the stock drops $2, its a pretty big loss of over two million dollars. Chances are he doesn't plan on losing.

Common Wealth Bankshares (CWBS) also looks like its a go. The stock is currently trading at 23.38. There have been some recent purchases of 73,600 shares at a value of $1,472,145. I say it will at least go to $30.00. Also the stock has had a terrific 2nd Quarter will over 70% growth. This is phenomenal for a bank stock. The insiders are putting big money in these high growth bank stocks because they are safe investments. They are not worried that it will lose value quickly like most risky small cap stocks. They throw in $30,000, wait a few months and get back another $20,000 in profits. It is a little harder for the small time investor to make big money with bank stocks, but for the serious, wealthy investor, bank stocks provide an easy and SAFE way to buy that new Mercedes Benz you always wanted without lifting up a finger.

The last bank stock that I want to show you is...

Gateway Financial Holdings (GBTS). GBTS is currently trading at 17.55. I like this stock because there has been some nice insider buys. In August, there have been 31,000 shares purchased at a value of $548,000. The stock has also had a great 2Q, with a +94.8% profit increase. That's pretty good. It makes me anxious about the 3rd and 4th Quarter.

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The last couple of stocks that I will mention are also great to look at as well. They are risky as well, but provide a huge opportunity for big money.

Ebank Financial Services (EBDC) is a tiny small financial institution that pumps out just few thousand shares a day. Yet, there have been huge insider buys in September and even more throughout the summer. Just in September alone, 461,000 shares were bought at a value of $525,100. I believe that this $1.35 will soon be trading at $3+ as soon as it gets more exposure and volume. My advice is to accumulate shares little by little. Lets say you want to buy a total of 5000 shares. You should accumulate them 500 to 1000 shares a day. That way you do not attract too much attention from the MM's since this is an extremely low volume stock. But do not confuse low volume with low potential. The fact that the insiders have started accumulating EBDC is a good sign that the price will appreciate in the near future. I know that EBDC is an .OB stock and that means it is traded on the OTC.BB as a penny stock, but I really think it is one of the few penny stocks that actually have a chance of making somebody some money.

Motorsports Emporium INC (MSEP) is tiny and only a penny, lol. So what does anyone want with it? That is what I'd like to know, because company insiders have purchased $326,000 worth of the stock. That's about 36,000,000 shares of stock. My opinion is, if you have a little money on the side that you don't mind risking (and maybe ultimately losing), buy some shares and hold on for a wild ride. Who know, you and the rest of the insiders who were brave enough to buy might make something! Think of it this way, $5000 gets you 500,000 shares. Lets say the stock one day hits 5 cents. You just made an easy $20,000. Not bad, eh? Don't believe it can happen? Take a look at HISC and BRVO.

US Microbics INC (BUGS) is another risky penny stock play. Insiders have quietly purchased shares and now the stock is now up. Use this as an example of how MSEP can perform. I still like BUGS as a buy, but be very careful as it is already up. Wait for the sell off to die down first.

The Last stock I want to profile is LSI Industries (LYTS). I already mentioned this as a Hurricane play, but I want to bring it back up because of recent insider buys. Not even a few days ago, insiders bough almost 8,000 shares totaling $128,000. I know its not much, but at only 16.82, LYTS has a chance to hit $20 and up really easily!

Well that concludes this special insider buying highlight! About time! Of course there are other stocks that I didn't mention, because I plan on mentioning them when the time is right. Still, I left you all with quite a few to pick and choose from. I will reveal my favorites later on tonight for who ever is interested. Above all, have fun with this and do your own research before you plan on buying. And please if any one of my picks helped you make a little money or buy a Porshe, let me know, eh? Lol, jk. Later everyone!


Out of all the Insider Buy stocks that I have profiled, my favorite are...WRP, CT, ABR, GSL, CNP, XGEN, EBDC, MSEP, LYTS, FCNCA, NARA, CWBS, PQUE, SHRP, PCTY.

Others that I really like that weren't profiled are: ACR, CHK (huge buys)

Some others that I didn't talk about today, but I will soon: ALCO, UIC, CADA, ABGX, MXM, TSAI, PSAI, PRX, DUK, ATLS....and thats it for now. lol.