There are opportunities to gain money around nearly every corner of the stock market. The issue is that most people don’t know how to spot them, or they can’t distinguish between great opportunities and lousy Wall Street tricks.
In this column, I highlight one great way to identify big-money profit possibilities: insider trading.
And I’ve just found one such case that could lead us to significant gains…
I’ll cut right to the chase so we can move forward with our examination of the stock in question…
On October 27, a director of Dow Chemical Company (DOW) purchased 21,500 shares in his own company’s stock at $46.56 per share!
That adds up to a total worth of more than $1 million!
At this point, we already know that we have real insider activity that warrants serious research and attention. This type of development can’t go unnoticed.
In the stock market, we have to pass up certain opportunities simply because we can’t devote ourselves and our resources to them all. That’s why it’s vital to separate those opportunities and decide which ones give us the best chance to profit in a big way.
And when an insider dumps a million bucks into his company’s stock, we can easily view that as a significant chance to make real money.
Examining DOW
First of all, DOW is a basic materials company that manufactures and supplies chemical products for use as raw materials in the manufacture of customer products and services worldwide.
And it has recently been accompanied by some good news—such as a one member being awarded a lifetime achievement honor for crop protection—despite enduring a significant drop in share price over the past month or so.
Let’s look at the chart for Dow from Stockcharts.com:
After 2 years of climbing, DOW finally fell quite abruptly from late September into the middle of October, yet one director has decided to buy $1 million-worth of shares anyway.
As with most insider situations like this, there are really two main possibilities.
- The insider who purchased shares views the recent drop in the price of the stock as an opportunity to buy DOW at a ‘discount price’, or
- This insider just learned some piece of privileged information that leads him to believe another rise in the price of DOW is coming soon.
For my money, I’m leaning toward the first option. DOW simply doesn’t appear to be a healthy stock, and I would expect it to experience a significant fall before any significant rise in price.
With that being said, I will continue to watch DOW as option 2 would likely push DOW up and earn stock holders profits. So I’m going to wait for the right indicators to point up before investing in DOW.
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