Following specific insiders and looking for trends with respect to how such insiders invest is a great way to learn about which sectors may underperform or outperform in a given period of time.
In my case, I closely follow the quarterly earnings releases of Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A), looking for clues about which sectors to consider and which ones to avoid, as Buffett’s investing style is similar to my own.
For example, my slightly bullish perspective on precious metals has become much more of an aggressively bullish perspective after the company announced a large stake in one of my top Canadian picks in the gold mining space, Barrick Gold (TSX:ABX)(NYSE:ABX).
Following such transactions, I am able to gauge what the smarter people in the room are doing, and adjust my thinking. This strategy has worked for me, and I’d thus encourage all investors to do the same with insiders they trust.
As always, please remember to consult with a certified financial advisor into your own homework before making investing decisions. Insider buying and selling activity is not necessarily indicative of the future performance of a given company’s stock price, and insiders regularly buy or sell positions in companies they own or manage for reasons other than expectations of future stock price performance.
Analyzing insider transactions in a given stock is one tool of many to gain pertinent information to assist in investment decision making.
Invest wisely, my friends.