Key

    Before you buy or sell a stock, it may be useful to see what the insider money is up to since studies have shown that insiders have been able to outperform the market on their buys, but not on their sells.

     Therefore, the screen first searches out those companies that have had a "significant" level of insider buying-in this case those companies with at least three insider buys. The insider buy and sell data comes from Market Guide, which covers those transactions in the last six months.

     The second screen concerns net buying. The screen here seeks companies that have had more shares of stock purchased by insiders than have been sold.

     The next set of criteria limits the market capitalization of the passing companies to greater than $50 million.

     The next screen eliminates over-the-counter (OTC) stocks. Exchanges have listing requirements that establish minimums for company size, share availability, and financial strength.

     The next two screens exclude companies categorized as part of the Miscellaneous Financial Services and Real Estate Operations industries, which eliminates closed-end mutual funds and real-estate investment trusts (REITs).

     The next screen measures the number of net shares of stock purchased (shares purchased by insiders minus shares sold by insiders) as a percentage of the overall number of shares outstanding.  Here we look for net insider buying of at least 3% of the float.

     The next screen insures that the stock has not already made its move but is just beginning to do so.

     The last screen insures EPS estimates for the current year are positive.

     The insider screen here is not meant to independently generate a list of investment candidates. Instead, these are companies that are experiencing above-average insider buying activity-a signal that they may warrant further analysis.   To buy or sell strictly on what the insiders are doing is not a wise investment strategy. However, to ignore what the insiders are doing may be an investment mistake. Remember, insiders can sell their shares for a multitude of reasons. For the most part, however, insiders only buy because they expect to make money. By keeping on eye on what the insiders are doing, you have one more piece of the investment puzzle that may help aid your investment approach.