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What we can learn from insiders' buying and selling

Stephen Clapham outlines some unheralded ways to study directors’ dealings
What we can learn from insiders' buying and selling

One of the first things that a junior analyst learns is to keep an eye on directors’ dealings, but sometimes this is more complicated than first meets the eye.

It’s worth prefacing these remarks with the comment that although investors want company CEOs and CFOs to have skin in the game, individuals shouldn’t have all their chips in one basket. It’s perfectly reasonable for a CEO to have an element of diversification in his or her portfolio. The analyst has to try to understand how much is acceptable and when a stock sale is more than diversification and amounts to a vote of no (or reduced) confidence in the company’s future.

 

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