When people "in the know" within a company - including executives, board directors, and shareholders of 10% or more - buy company stock with their own money, it's called insider buying. This kind of activity is often viewed as a bullish sign among investors, because these individuals typically have more intimate knowledge of the company's inner workings and strategic plans than the average investor. By purchasing shares, it suggests these insiders believe the stock price is likely to rise, making the transaction a powerful vote of confidence in the company's future.
But when a company insider buys stock in the aftermath of negative news or heavy selling - as with the post-earnings insider buying on troubled regional lender New York Community Bancorp (NYCB) - it can come across as more of an attempt to boost investor morale than a genuine vote of confidence. That brings us to the recent insider buying on Herbalife (HLF), a long-time short target of the famed hedge fund manager Bill Ackman.
