The Insider Dossier: Your Guide to Supercharging Safe Profits on Legal Insider Trading
© 2014 Humanix Books
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Printed in the United States of America and the United Kingdom.
ISBN (Hardcover) 978-1-63006-020-6
ISBN (E-book) 978-1-63006-021-3
Library of Congress Control Number 2014930395
Contents
Decoding the Mystery of the Public Room
I: The Insider Edge
Chapter 1: The Benefits of Insider Trading
The Insider Advantage in Practice
Chapter 2: The Difference Between Legal and Illegal Insider Trading
Not Even an Insider: The Martha Stewart Case
The Largest Insider Trading Ring in History
How to Get Caught: Making Absurdly Incriminating Statements
Conclusion: Illegal Insider Trading Will Catch up With Wrongdoers
Chapter 4: Not All Insiders Are Created Equal
C-ream of the Crop: The C-Level Executives
Under the C-Level: The Board of Directors
The Blind Insiders: Big Money and Wall Street’s Corporate Raiders
Conclusion: Start at the Top of the Hierarchy and Work Your Way Down
II: Beyond Insider Trading — Other Factors to Look For
Technical Metrics to Consider With Insider Trades
Technical Analysis is a Risk Reduction Tool for Entering Insider Trades
Chapter 6: Fundamental Analysis
Valuation Metrics for Insider Trades
Other Valuation Metrics: Things to Look For
Chapter 7: The Utility of Insider Sales
Chapter 8: The Money Multiplier System
Options 101
Call Options and Insider Trades: Magnifying Gains
Advanced Options Strategies for Insider Trading: Cash in on Puts
Bringing It All Together: Which Options Strategy Is Best?
Conclusion: The 10 Key Takeaways From This Guide
When you’re a business news journalist as I used to be, you get to meet and interview a lot of CEOs and other high-profile magnates. I’ve been lucky enough to ask questions of Bill Gates, Warren Buffett, Michael Dell, Intel’s Andy Grove, Southwest Airlines founder Herb Kelleher, Ted Turner, Richard Branson, and countless others.
Some you chat with in person; others you talk with on the phone, on a satellite video connection, or at a press conference. The one thing all of these highly successful individuals have in common: Each has an idea to sell.
Sometimes they’re selling a theme: “My company is growing fast — we have many quarters of rapid expansion still ahead.”
Other times they’re trying to revive the firm’s reputation: “The restructure is going perfectly according to plan, even though we just lost millions more in red ink last quarter.”
And still others aim to downplay expectations and manufacture a surprise turnaround with an upcoming profit report: “Things are beginning to look better, but keep in mind that we’re expecting lots of positive change between now and next quarter . . .”
What does all of this have to do with a book about tracking the share-buying activities of corporate “insiders” (the CEOs and others who make up a company’s leadership)? Plenty, because here’s something else you realize after following the comings and goings of top executives: Almost anyone who’s a good talker, with a well-cut Brooks Brothers suit (not to mention a top-notch stylist and a good manicure), can act the part of the CEO. That’s easy.
But when it comes to actually creating shareholder wealth . . . Well, that’s something else entirely. Sure, the CEO can follow the standard corporate strategy playbook: Is an underperforming division holding back growth? Sell it off. Moribund stock price? Restructure the company. Long-term growth rates are slowing? Refocus on new profit opportunities.
That’s all well and good, but are those viable strategies? For every successful turnaround, a dozen others never pan out. Why? Because of poor decisions by upper management. And that’s something that can’t be fixed — no matter how many press releases are issued, or how often the CEO appears on the financial news programs.
That’s why it’s so important not to follow what executives say, but rather what they do with their money.
I’m not talking about stock options (which many companies dole out like candy, costing them nothing), but cold hard cash. That’s money already earned by the board members and executive team that they’re now reinvesting back into their company’s equity base.
When you start seeing that happen, that’s when the probabilities for creating sustainable shareholder wealth begin looking a lot better. In betting parlance, the corporate types and the shareholders all have their money riding on the same horse.
So that’s the goal: finding companies where the corporate insiders are personally buying their stock in significant quantities. But, like many things on Wall Street, even that simple equation is a lot more complex than it appears.
That’s why you’ll be happy to have Andrew Packer, editor of Newsmax Media’s Insider Hotline Newsletter, to guide you through the ins and outs of this investing strategy.
Keep in mind that