One of the things that many investors look for in a company is high insider ownership. This seems to indicate that insiders, those who probably know the company best, are confident of its future success. While not a perfect indicator, it often is a characteristic of stocks that become 100-baggers or better.
The flip side of this is that companies where the insiders own less than 10% of the common stock are liable to be poor long-term investments, though profitable short term trades are not impossible.
This is the practice of buying or selling shares of a company's stock (or some other security) based on knowledge that was acquired as an officer of the company, and that is not available to the general public. This is illegal.
Related Fool Articles
Recent Mentions on Fool.com
- 3 Reasons MetLife Is Wasting Its Time Fighting the FSOC
- Why I Stopped Wringing My Hands and Finally Bought Shares of Capstone Turbine
- Where Does 3M Company Go From Here?
- 8 Fascinating Reads
- Was SodaStream the Object of Insider Trading?
- Pall Corp.: Why You Should Invest In This Recession-Proof Industrial Supplier