The bull market recently stopped dead in its tracks when it fell from 2,010 points to 1,862 points—a drop I’m sure you’re well aware of.
That fall was felt in nearly every area of the market, yet it has brought a good deal of insiders out of the shadows to buy plenty of stock in their own companies.
This volatile market doesn’t seem to be scaring away a significant number of insiders, especially these insiders with heavy buying, and we could possibly follow them to big profits on market upswings.
As the market recently turned down and has just started bouncing back some, the insiders have turned bullish.
The ratio of insider sales to buys—where under 12 to 1 is bullish and over 20 to 1 is bearish—has just dipped below the 12 to 1 mark. Some of this comes from the fact that stocks are viewed as cheap by the insiders who have just witnessed a significant drop in the price of their stocks.
However, some of this comes from the fact that the insiders are solely focused on their own stocks, and can’t see what is happening to the overall market.
While some of them should be scared away, they are actually becoming more bullish and sinking even more money into their company’s stocks.
For example, let’s take a look at Books-A-Million, Inc. (BAMM).
BAMM has just experienced the total purchase of nearly 2 million shares by 4 insiders, which is valued at over $3 million!
But BAMM doesn’t have the usual characteristics of a healthy, strong stock…
Instead, it has fallen from relatively recent heights of about $3.40 to a new low of $1.50!
And this book retailer has annual and quarterly gross income data that is all over the place where I would like to see steady, consistent growth.
But with 4 separate insiders making purchases, I would expect to see some positive news surrounding BAMM coming out soon.
If that doesn’t happen, the BAMM insiders could simply be viewing their company’s stock as cheap, and are buying a bad stock.
With that being said, we are still very much interested in the right stocks that the insiders could help push upward as we catch the market upswings.
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