The Edge You Need
Many investors are rightfully skeptical of Wall Street’s entourage of brokers, and Oxford Club Chief Investment Strategist Alexander Green gets it.
As a former Wall Street advisor himself, Alex knows one simple strategy that the Street doesn’t want you to discover… and he’s on a mission to get it into the hands of regular investors.
And read on below to see how this strategy can give you an edge in these volatile markets.
– Ryan Fitzwater, Associate Publisher
It takes guts to buy stocks in a market as volatile as this one.
Most investors feel that if they’re going to stick their necks out, they need to have an edge.
Not just a perceived edge, but an actual one.
And the best edge, in my view, is to invest in the same stocks that the insiders are buying with their own money at current market prices.
Insiders have purchased stocks in record numbers recently. Yet the typical punter is doing the exact opposite.
Millions of investors have bailed out of stocks over the past few weeks because they couldn’t take the pain anymore. (And in doing so, they turned paper losses into actual losses.)
Corporate insiders couldn’t take the pain anymore, either.
They couldn’t stand to see their companies’ shares selling at fire-sale levels without doing something about it.
And so they did…
Recent data reveals that corporate insiders – whose purchases correctly signaled the bottom in 2020 and in other bear markets – are bottom-fishing.
More than 1,100 corporate executives and officers snapped up shares of their own firms in May alone.
It was the biggest ratio of buyers to sellers we’d seen since March 2020, the last bear market bottom.
Bloomberg reported on this, noting that…
The insider buy-sell ratio also jumped in August 2015 and late 2018, with the former preceding a market bottom and the latter coinciding with one.
CNBC cited the same phenomenon in an article headlined “Insider Buying Is Surging.”
Yet the spike in insider purchases coincided with investors pulling cash out of their equity funds.
The punters are acting on emotion. (Fear, particularly.)
The insiders are acting on numbers, analysis and reason. And perhaps a different emotion. (Greed.)
One of the best strategies you can follow is riding the coattails of knowledgeable insiders.
Why? Because they have access to all sorts of material, nonpublic information, like…
- The direction of sales since the company’s last quarterly report
- What new products and services are in development
- Whether there are expansion plans
- Whether there are potential mergers or acquisitions
- Whether the company has gained or lost any key customers
- The status of any outstanding litigation
- Whether the company will put itself up for sale
- Whether there are plans to take the company private.
And they have plenty of other good information that is unavailable to those of us on the outside looking in.
That’s why the SEC requires corporate insiders – officers, directors and beneficial owners – to file a Form 4 within two business days of any stock purchase or sale, detailing the number of shares bought, the date and the price.
Making this information public at least levels the playing field.
(You may not know why the insiders are buying. But at least you can see that they are.)
If you want to increase your stock market returns, you need to know what the insiders are doing.
Buying stocks that insiders are bailing out of – or selling stocks that they are eagerly buying – is a fundamental mistake.
Even when corporate fundamentals are checkered or poor, if the insiders are buying heavily, it is generally a sign that the problems are temporary and the stock is set to press higher.
Indeed, plenty of academic studies have confirmed that stocks that are seeing heavy insider buying tend to outperform the broad market in the months that follow.
Action Plan: Do you know which stocks the insiders are piling into right now? You should.
Because those are the companies whose shares are likely to perform best in the weeks and months ahead – no matter what the broad market does.
This is why I’ve put together an Insider Alert package to help you uncover exactly who is buying these stocks.
Fun Fact Friday
Bank earnings have been mixed this past week. Morgan Stanley (NYSE: MS) and JPMorgan Chase (NYSE: JPM) posted earnings losses, while Wells Fargo (NYSE: WFC) took a profit hit and set aside more money to soften the blow from bad loans. But Citigroup (NYSE: C) posted profits and revenues that exceeded Wall Street projections. Next week, the financial earnings continue. Bank of America (NYSE: BAC) and Goldman Sachs (NYSE: GS) are on deck to report before the bell Monday. We’re playing the trends in The War Room. And if you are looking for a long-term signal that bank stocks will eventually rise, just look at the gap between S&P 500 banks’ relative performance and the 10-year Treasury’s yield. They normally move in lockstep. As these two metrics revert back to their usual relationship, banks and financial stocks should rise.