Insider buying refers to company executives purchasing shares of the company's stock.
Company executives purchasing shares of a company's stock is called insider buying.
Since insiders necessarily have a better understanding of a company's strategies, performance, and industry than do outsiders, investors often take insider buying as a positive sign for the company and therefore the stock. However, since investors are prohibited from trading on material, non-public information (commonly referred to as insider trading), insider buying can't be taken as a positive indicator above and beyond what an investor might learn on his or her own.
Some investors also believe that high insider ownership suggests company executives are aligned with shareholders, because their personal net worth is directly tied to the performance of the company. For these investors, insider buying would indicate an engaged and effective management.
Related Fool Articles
Recent Mentions on Fool.com
- Announcing My Next "Outsider" Investment...
- 3 Reasons Intel Corporation Stock Could Rise
- Biotech Head-to-Head: Gilead vs. Celgene
- My Exploits at Barnes & Noble During the Financial Crisis
- 3 Stocks Pre-Retirees Can Buy and Hold for the Next 20 Years
- ExOne Co. (XONE) Discusses Their Binder-Jetting Technology