Introduction of Insider Alpha

By combining insider data with company fundamental and valuation data along with price action criteria we are able to help our clients generate investment ideas for virtually any investment style. We specialize in quantitative research for momentum, value, and short seller investors.

Momentum Investors

It is common for an Insider to be early in his or her purchase. It can take months before the expected positive developments begin moving the stock upward. Many investors get caught in this purchase trap which leads them to dead money or losses in the short term. We aid investors in providing analysis that combines insider activity along with security price trends to identify momentum-oriented investment opportunities. Significant signals include:
  • Insider buying at companies with rising share prices
  • Insider buying at share prices well above 52-week lows
  • Lack of insider selling at companies with rising share prices


Value Investors

Academic studies have concluded that insiders as a whole tend to be value investors, and any analysis of recent filings tends to reveal more value-oriented investments than any other type of investment. We assist our clients in providing the ability to measure price action, fundamentals, and equity valuation metrics to identify potential investment opportunities. Significant signals include:
  • Insider buying at comppanies with low valuations or positive fundamental criteria
    • Excellent cash flow
    • Increasing earnings growth
    • Increasing profit margins
    • Increasing sales growth
    • Increasing inventory turnover
    • Low price-to-book ratio
    • Low price-to-cash level
    • Low price-earning ratio


Short Seller Investors

Academic studies have concluded that insiders should be in a better position to know if there is a disconnect between their company's current valuation versus their own earnings and sales forecasts. In other words, Insiders look to also capitalize when their company's stock valuation are "ahead of themselves". We combine insider data, price action criteria, and company fundamental data to assist our clients in identifying these potential short selling opportunities. Significant signals include:
  • Insider selling at share prices well below 52-week highs
  • Insider buying at comppanies with high valuations and negative fundamental criteria
    • Declining profit margins
    • Declining sales
    • Declining earning growth
    • High price-earning ratio
    • Declining inventory turnover
    • Negative cash flow
    • High debt-to-equity ratio
    • High price-to-sales ratio

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