Friday, January 17, 2003

Stand By Your Stock

Every six months or so, we run a screen to find companies where insider buying has significantly outpaced insider selling. The exercise consistently uncovers promising stocks.

Consider Borders Group, the Ann Arbor, Mich.-based book and music retailer. A look at insider activity over the past six months shows insider purchases of 95,000 shares and insider sales of 25,000 shares. Though just a drop in the bucket compared to the total shares outstanding, the net buying of Borders' stock is probably a positive sign.

So why isn't it definitely a positive sign? The motives for insider activity are never certain. An insider might be selling to raise cash to pay for college tuition or a summer home. On the other hand, an executive may be buying to impress Wall Street about his or her company's prospects.

Bottom line: Insider activity is just one factor to consider when evaluating a stock.

Full story at Forbes.com