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Andrew T. Gillies is Director of Communications at the Center for Audit Quality, an affiliate of the American Institute of CPAs, in Washington, DC. Based in Washington since 2002, he has also worked in editorial and communications roles at the Investment Company Institute, the World Bank, Forbes, and Vault.com. His policy-themed writing has focused on aerospace and defense, energy and environment, transportation, and financial services.

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