How it works
Every time an officer or director of a U.S. public company buys or sells its stock, they must file a Form 4 with the SEC within two business days. We read every one of those filings, every night, and look for the strongest kind of buying:
- Open-market purchases only. Stock grants, option exercises and pre-scheduled plan trades don't count.
- Clusters. One director buying could be a personal quirk. Three or more buying within a month is harder to ignore.
- The CEO or CFO. They see the numbers first.
We then keep only companies that are solvent and cheap on price-to-book. Insider buying matters most when it confirms a value case the market is ignoring.
Why it works
Peter Lynch's line sums it up: insiders might sell for many reasons, but they buy for only one — they think the price is going up. Executives know their order book, pipeline and cost cuts before the public does. Buying doesn't break any rules; it just reflects better information, and they're betting their own money on it.
The track record
- Cohen, Malloy & Pomorski (2012) separated "routine" insiders (who trade in the same month every year) from "opportunistic" ones. Opportunistic trades carried essentially all the predictive power: portfolios following them earned about 0.82% per month in abnormal return value-weighted (about 1.8%/month equal-weighted). Routine trades earned about zero.1
- Lakonishok & Lee (2001) found that stocks with heavy insider buying beat those with heavy selling, with the effect strongest in smaller companies and in value stocks.2
- Seyhun's decades of work (Investment Intelligence from Insider Trading, 1998) documented the same pattern, and found it strongest when many insiders act together.
The catch
- Insiders can be early — or wrong. Management is often optimistic about its own company.
- Small buys at tiny companies. $500K is a lot at a $60M company, but check whether it's meaningful to the buyer's own wealth.
- The signal fades. Most of the research edge shows up over the following 6–12 months, not years.
Today's darlings
These are the companies that pass the screen right now, ranked the way the screener ranks them. Figures come straight from each company's SEC filings, updated every night. We filter out obvious data oddities (one-time special dividends, blank-check shells, sub-$50M micro-caps) so the list shows names worth a closer look — not recommendations.
See every match, with the arithmetic
Open the screener with Insider Conviction already selected. Free to use; every row explains exactly why it qualified.
Run the Insider Conviction screen- Cohen, Malloy & Pomorski, "Decoding Inside Information," Journal of Finance (2012).
- Lakonishok & Lee, "Are Insider Trades Informative?" Review of Financial Studies (2001).
Educational content, not investment advice. Past performance — of people, papers, or backtests — doesn't guarantee future results. Do your own homework before buying anything.