The First Cut: Insider Activity
by John Bajkowski
Many investors monitor the buying and selling activities of corporate insiders because they are privy to information regarding new products, competition, and operating environments and therefore better positioned to understand the future prospects a company.
The term insider refers to a wide-ranging group of individuals and large shareholders. While it is illegal to trade stock based on material, non-public information, trading by insiders using non-privileged information is legal, albeit highly regulated. SEC-required reports outline insider transaction histories and ownership interest; it is those reports that investors monitor.
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