Often, insiders buy small amounts of their stock to give the impression of confidence and to create an illusion that the company is doing better than it actually is. Be weary of this, Cramer says. The way to know if the insider buying is legit is when it’s big. If you see truly colossal insider buying, even if it isn’t at the high, then you should dig deeper.
It’s the volume of the insider buying that declares its sincerity. And when an insider buys a truckload of his own stock at its high, it’s definitely arrogant – but it’s bankable. Corporate insiders aren’t going to buy at the high unless they have some unshakeable conviction about their companies.
Most investors know to wait for a pullback before pulling the trigger. But when insiders buy high, that generally means they don’t think there’s going to be a pullback. There’s nothing more bullish than that, Cramer says.
Bottom Line: When you see insider buying in a stock that’s at a 52-week high, Cramer thinks you should be buying too.
Questions? Comments? email@example.com