FAQs Related to Insider Trade Reports Subscription
Q1. What is Insider Trade Reports?
Insider Trade Reports (ITR) is a service where we provide you with clean up-to-the-minute actionable data regarding the stocks company insiders are buying or selling. Since insiders have insights into the workings of their company, it may be wise for an investor to look at these reports to see how insiders are legally trading their stock.
As you can see in our Academic Research section, several academic studies conducted over several decades have demonstrated that stocks of companies where the insiders (CEO, CFO, Vice Presidents, Directors) are purchasing stock with their own money tend to significantly outperform the market.
Insiders are required by the U.S. Securities and Exchange Commission (SEC) to electronically file a form called the Form 4 listing transactions by company executives, directors and 10% owners within 2 days after an insider trade takes place. These filings come in until 10 PM Eastern Standard Time every weekday.
We present this data to you in four different formats.
- Insider Trade Reports subscribers get a list of the top insider purchases and insider sales from the previous day before the market opens the following morning. We start working on the raw insider data right after the 10 PM EST filing deadline and first remove all the noise from the data. We then analyze the filings, run the top purchases through our proprietary model that rates each of these stocks and then send you an email with these transactions. We also provide you with a set of key valuation metrics related to these companies and indicate which companies we are purchasing for our short-term and long-term portfolios. You will receive these emails Tuesday through Friday. The filings for Friday are covered in a separate email called Insider Weekends that is discussed below.
- On the Insider Trade Reports website you can see a raw list of insiderpurchases and sales on two separate pages that get data directly from the SEC and automatically refresh themselves every 3 minutes. You can view filings by date (use the “Filings for” drop down on the top right of the page), you can view filings by company, you can view filings by a specific insider and you can also view the actual Form 4 filed by the company by clicking on the filing date (opens in a new window).
- We have also created a dedicated Twitter account available to Insider Trade Reports subscribers where we highlight important insider transactions during market hours and also post the intra-day trades we are making for our portfolios. To access this Twitter account, please send me an email using this form with your Twitter ID and the email address you used to subscribe to the ITR service.
- Once a week we aggregate all the insider purchases and sales from the previous week and publish a post called Insider Weekends that lists the top 5 purchases and sales from the previous week. If you would like to receive this post by email, you can sign up for this free service through our sister website SINLetter.com.
Academic research has not only shown that stocks with insider buying tend to outperform the market but according to a research paper published by the Wharton School of Business in 1999, one-quarter of these abnormal returns accrue within the first five days after the initial transaction, and one-half accrue within the first month. These studies were conducted several years ago before the days of high frequency trading or rapid dissemination of information through the internet. A large portion of the abnormal returns are now realized with the first few days after the insider transaction takes place.
By providing you with clean actionable reports within hours after the filings reach the SEC, the Insider Trade Reports service gives you valuable information that is not available to other market participants until several days later.
Cleaning the insider data, analyzing more than a dozen stocks every night and then publishing the top insider purchases and insider sales before the market opens the following morning is challenging especially since the data continues to come in until 10 PM EST. Over the last decade I have honed my investment methodology to look for certain criteria, a checklist of sorts, that I run every stock through before I decide to explore the opportunity further. The model we built for Insider Trade Reports looks at as many as 20 different criteria including but not limited to past insider transactions to come up with a simple rating on a scale of 1 to 10 for the top insider purchases every day.
The model provides a great starting point but should not be a substitute for in-depth research.
Nejat Seyhun, a renowned professor and researcher in the field of insider trading at the University of Michigan found that when executives bought shares in their own companies, the stock tended to outperform the total market by 8.9% over the next 12 months. Conversely when they sold shares, the stock underperformed the market by 5.4%. If you’re interested in learning more about insider trading, we strongly recommend reading Seyhun’s book ‘Investment Intelligence from Insider Trading’.
While insider buying is usually a good sign, don’t be alarmed by insider selling, unless there is a lot of it. Insiders tend to buy because they have positive expectations, but they may sell for reasons independent of their expectations for the company.
Some of the noise we encounter while analyzing filings include,
1. Transfer of stock between family members
2. Conversion of one type of equity into another
3. Incorrect filings
4. Late filings
5. Duplicate filings
6. Purchases and sales related to secondary stock offerings,
7. Private placements
8. Purchases or sales by funds that appear as transactions by directors who happen to be partners in those funds
Yes, I have skin in the game and actively use insider trade data to start or add to positions in my portfolios. I maintain two personal portfolios. One of them is dedicated to long-term holdings and the second one to short-term trades. I disclose my insider transactions related trades through the daily emails as well as through the dedicated Twitter account.
There are no free lunches in the market and this strategy does not offer one either. Following insider transactions gives you an edge. Using a disciplined approach and managing downside risk are essential to long-term success. I personally try to limit positions to no more than 5% of my overall portfolio. For the short-term trading portfolio I plan on using 10% trailing stop loss orders to limit risk from any individual position to no more than 0.5% of the portfolio.
So for example if the size of my stock portfolio was $200,000, I would try to limit the size of each of my positions to $10,000. By using a 10% trailing stop loss on the short-term trades, I can limit the loss to roughly $1,000 per position or 0.5% of the overall portfolio. I tend not to use stop losses for my long-term positions.
Please note that my stock portfolios are part of a bigger asset allocation strategy and I would recommend consulting with your financial advisor before making any investment decisions.
FAQs Related to Insider Trade Reports Subscription
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We offer a monthly subscription plan, a quarterly subscription as well as an annual subscription. You can save 17% by signing up for the quarterly plan or save even more by signing up for the annual plan.
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