Markets

The Bank Insiders Were Buying: Did You?

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Were you surprised by the strength of the financial stocks over the last year?

Maybe you shouldn't have been.

One of the biggest CEO insider buys in 2016 was by Jamie Dimon of JPMorgan Chase who bought 500,000 shares for $26 million in February.

On the day he bought, JPMorgan's shares had hit a new 2016 low and were down 16.5% year-to-date thanks to the early year stock market sell off.

At the time, Dimon already had 7 million shares of JPMorgan stock in his 401k and his wife also owned a million shares in her own account.

It was just Dimon's third purchase of shares on the open market in the prior 12 years. He bought 500,000 shares in January 2009 during the Great Recession doom when bank shares were plunging to multi-year lows and another 500,000 in July 2012.

What did Jamie Dimon know that February?

The shares have since soared 68%.

In 2016, the Bankers Dove In

But he wasn't the only banker buying in 2016.

At Huntington Bancshares, three corporate insiders, including the CEO and CFO, bought on February 1. Since then, the shares have risen 63%.

At Zions Bancorporation, between January 28 and February 9, the CEO, the CFO, a director and two Executive Vice Presidents all bought shares. The shares are up 104%.

At KeyCorp, there was a huge cluster buy of insider buying between January 25 and February 8 that resulted in 9 directors and the CEO all buying shares. The stock is up 73% since those buys.

They're at it Again in 2017

2016, it turns out, wasn't a fluke.

Despite the rally in bank stocks, the insiders are diving in for even more shares in 2017 but many of those buying are from the insiders in the community banks.

For instance, an Executive Vice President at Arkansas-based Simmons First National Corporation bought 1,000 shares between Feb 2 and Feb 6, 2017.

At First Merchants Bank, headquartered in Muncie, Indiana, a director bought 6,836 shares on January 31, 2017.

Shares of First Merchant Bank recently hit a 10-year high.

More . . .

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These Insiders Know Something You Don't

Why are insiders suddenly buying up company stock shares with their own money?

According to legendary investor Peter Lynch, that when major officers sell shares of their own companies they may do so for a variety of reasons. But they buy for only one reason: They expect the stock price to go up.

Zacks distilled a selection of the most compelling insider stock purchases, and is opening them to public view -- only until Sunday, February 19 .

See the stocks now >>

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Insider Buying Sends a Strong Signal

Why would these CEOs and corporate insiders spend so much of their money on their own companies' stock when they already own a ton shares already?

Greed!

Pure and simple.

The opportunity to make more money motivates people- even people who are already millionaires like Jamie Dimon.

If top insiders are buying, it's because they know something very good is going on at the company. Maybe it is a new product. Or contract. Or pending merger.

Whatever the reason, they are very confident that shares will be on the rise. After all, who would buy more stock in a company if they knew it was sinking???

Buy When the Insiders Buy

When high level insiders buy, they are required to report the purchases to the SEC within 48 hours of the trade. The trade then becomes public information.

Hedge funds and other professional investors routinely use this information to get an edge on their trades.

For most of us, though, it's not easy to get access to the insider information. While the media will trumpet huge insider buys like Dimon's $26 million buy, did you hear anything about Cree CEO Charles Swoboda's $222,000 buy of 10,000 shares on October 20, 2016?

The challenge is getting easy and reliable access to all the insider trades and then figuring out which ones to buy.

Where to Find the Insider Buys

Anyone can go on the SEC website and get the insider trading information but it's time consuming to search by individual companies.

Some investment firms collect the insider buying data and can provide it to you as a weekly list. Have you ever seen one of those lists? The sheer number of companies can be overwhelming.

In some instances, the insiders have been known to buy en masse. Then what's an investor to do?

This happened during the stock market dip in August 2011. As stock prices fell, insiders felt that their companies were undervalued and rushed out to buy shares.

That August, insiders bought stock in 50 different S&P 500 companies in just one week. Even if you got a list of those stocks, how would you narrow it down to the stocks that were truly worth buying?

To solve this problem, our Zacks research team developed a strategy that monitors selected insider buying activity at companies that already show strong earnings and excellent valuations. We do the work of sifting through all the insider buys so you don't have to.

Just a handful of stocks meet the demanding criteria of our Zacks' Insider Trader . Right now, we've narrowed it down to 12 insider buys that make the grade.

I just spotted a massive buy in which 2 high-ranking officers spent over $10 million of their own money to buy shares of their company, a large-cap retailer with stores around the world.

What's more, both of these insiders (one of whom is the Chief Operating Officer) already receive stock options as part of their compensation. But they're eagerly reaching into their pockets to buy more. This is compelling evidence about the future of the company.

Recent announcements by the company have answered some questions that have held the stock down. With the uncertainty out of the way, shares look ready to rocket higher.

You are welcome to share this and 11 other insider trades with explosive gain potential. But please be aware that we must limit access to these stocks. Entry to our portfolio closes to new investors Sunday, February 19 .

See Zacks' Insider Stocks Now >>

Best,

Tracey

Tracey Ryniec, Zacks' value and insider strategist, is Editor in Charge of the Insider Trader portfolio .

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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