No insider dumps millions into stock of his own company just for fun. He does so because he expects the price to rise and he wants to profit from that climb.
And while the insiders know the most important information regarding their respective companies, they may not understand how outside circumstances impact their stock.
So with heavy insider activity surrounding 1 stock, are they indirectly showing us a big opportunity to profit or leading us into a trap?
Tracking the insiders on Wall Street has been a very profitable endeavor, but part of that is separating the good insider hints from the bad.
Right now we need to decide if the situation surrounding Hertz Global Holdings, Inc. (HTZ) is going to be profitable or costly.
At the end of November, 2 insiders combined to purchase more than $2 million worth of shares in HTZ.
Are those insiders acting on some piece of new information that should push the price of HTZ up, or are they acting on a recent price drop without considering the other circumstances within the stock market?
First of all, HTZ has experienced a drop since August from $31.50 to about $22 when the insider purchases were made.
This generally leads me to believe that an insider could easily perceive this stock to be at a discount price after such a fall. In that case, I would stay away from it.
However, the fact that more than just 1 insider made this move makes me think that there could be more to the story than just a simple misperception.
That’s when I dug deeper and found that yesterday, roughly just a week after the insiders made that purchase of shares in HTZ, the announcement was made that a wholly owned subsidiary of HTZ opened a new facility in Montana.
Did the insiders buy shares because of that opening? Is there more positive information about this new facility that the insiders know but the public doesn’t? Or is this news completely irrelevant?
We simply don’t know the answers right now, but we don’t need to in order to decide when to trade HTZ. Right now, the price of HTZ is below its long-term moving average, so I’m staying away from a purchase of shares at the moment.
However, should that change and other indicators signal a buy alert, I’ll be happy to take advantage of the hint the insiders have given us and purchase HTZ.
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