You know I love to follow insider trading.

But 2023 was a terrible year for following insiders.

And the reason for that is… for the most part, they were wrong.

Or were they?

The ultimate arbiter of that will be time. And despite 2023 being a struggle for insider plays, we still know one thing for sure…

Insiders buy shares only if they think those shares are going higher.

They can sometimes push the shares higher just by taking a bullish tone, so it usually pays off in spades to follow them religiously, especially in a bull market. They’re not right all the time, but they’re right way more often than not.

It’s also important to remember that insiders don’t fall victim to short-term thinking. They can’t even sell their shares until six months after they buy them. So while everyday investors may be thinking short term, the insiders are playing the long game.

In 2023, it was only the techs that moved higher. But insiders were not buying techs – they did that in 2022 when techs were getting slammed.

Instead, insiders were buying beaten-up stocks in one particular sector that didn’t pick up until the end of the year. That’s why it could be the sector to watch in 2024.

That sector is the small and midcap sector. This sector is especially sensitive to interest rates, and last year, the interest rate hikes worked against it. But at the end of the year, the rate picture began to turn more bullish, with the Fed signaling a lower rate posture in mid-2024.

That could light a fire under these stocks.

So how do you know which stocks to jump into in 2024?

Well, from an insider perspective, you want to follow a time-tested formula.

Here’s a simple five-step checklist for finding a strong insider buy.

1. Buy only if at least three insiders are buying on the open market.
2. Make sure the buys are legitimate and not options exercises.
3. Make sure the buys total at least $1 million. Small buys just don’t cut it.
4. At least two of the buys need to be by officers within the company.
5. The company cannot be loaded down with debt. Cash flow and profitability matter, and a huge debt load can torpedo even the best insider intentions.

YOUR ACTION PLAN

Insiders tend to buy heavily right after earnings releases, and we are just now entering earnings season! In The War Room, Bryan and I are off to a hot start already in 2024, going 16 for 16 on our combined trades for a 100% win rate last week. With earnings season getting into full swing, I expect a new batch of trading opportunities on deck.

So… what are you waiting for? Sign up for The War Room now and join the insider party!

FUN FACT FRIDAY

The Largest Snowman Ever Built Was Over 122 Feet Tall! In 2008, the town of Bethel, Maine, constructed the world’s tallest snowman. Standing at an impressive 122.1 feet tall, the snowman (which was named “Olympia”) towered over the town and captured the attention of people worldwide. It still holds the record as of 2024.