Insider sales - how much attention do you pay to them?

AlfredSokol said: "Sure, sometimes an insider dumping shares can be a [B]red flag[/B]. Other times it could just be a case of needed liquidity. Lets face it, if you need to add a new wing on your mansion, you can use the extra cash. What do you think when [B]insider sales[/B] happen?"

Corey said: "Just like insider buys, I try to figure out several things. 1) The role of the buyer/seller within the company. How much information are they privy to? 2) The amount bought/sold relative to the amount that person can afford. If they buy $50,000 and they make several million a year, then it is a drop in the bucket and means nothing. 3) Is it a time trade? As in, do they automatically sell at the beginning of every month X numbers of shares? My dad did this. 4) Are they using options? 5) How many insiders are buying/selling around the same period? Normally I pay less attention to selling unless it is a significant amount relative to how much that person owns, and several people are selling at once -- and only when they DON'T use options -- because then they are really dumping the stock. I consider buying important only when it is a significant amount and several people are doing it at the same time -- and they aren't timed buys. My thoughts at least..."

Rbreb13 said: "Good job Corey. Thats pretty much the way I look at the insider issue. Every buy/sell has its own set of circumstances that need to be looked into."

JAP said: "Paying attention to insider selling is a good thing. The CEO of CFC (Angelo Mozilo) was dumping his shares left and right... at the same time he was going on CNBC almost everyday and telling people the housing/subprime market and his company was doing fantastic... yeah sure. CFC now trades in the mid $20's. :wave:"

Corey said: "[QUOTE=JAP]Paying attention to insider selling is a good thing. The CEO of CFC (Angelo Mozilo) was dumping his shares left and right... at the same time he was going on CNBC almost everyday and telling people the housing/subprime market and his company was doing fantastic... yeah sure. CFC now trades in the mid $20's. :wave:[/QUOTE] When he started selling, didn't they prop the stock up with a buy back program (funded by DEBT) at $37? Now THAT was hilarious. Can't fool the market, Mozilo."

scottlarock said: "I bought DOW chemical last year at 36.91, and right after I bought it they had some mediocre quarter results. I was nervous about holding the stock at $33 a share, but I noticed that the insiders bought like crazy between $33-36 a share. Then I hit my 366 days of ownership in July this year and I saw that the insiders were selling like crazy between 44-46 a share in April and May. I sold mine at 46.49 and felt great about gettin' the heck out of dodge. Though it did go up to 47.50-ish the next day. It isn't there now! I think DOW gives their directors/higher-ups some kind of bonus stocks every year or something though because they sold pretty heavily in April of 06 at $40 a share. Right before it dropped to $33! Though if they figured it was going up, why would all of them sell it??"

newinvestor123 said: "Corey pretty much summed it up. I consider insider buying to be icing on the cake - It comes near the end of a long line of data points - But large blocks of insider selling from several different people will probably keep my from buying a stock, regardless of how good everything else looks. There are always better buys out there... You just have to find them..."