The major market indexes ended in the red yesterday, with the Dow Industrial Average falling 0.5%, while the S&P 500 and the Nasdaq Composite declined 0.7% each. Since the beginning of the year, the stock market has faced substantial selling pressure on investors' concerns about interest rate increases by the Federal Reserve to tame multi-decade high inflation, supply disruptions arising from the Russia-Ukraine war, rising energy and commodity prices, and the potential for a recession.
Given the volatile market backdrop, investors have been tracking insider stock purchases to identify fundamentally sound companies. An insider can be anyone employed by the company–typically an executive or a manager–who owns more than 10% of the company's voting shares. Due to their active involvement in the company's affairs, insiders usually have the most up-to-date information on a company and its outlook. Insider buying is often considered a reliable indicator of a company's performance because insiders often have intimate details of a company's operations, Capex plans, and order flows that could be unknown to analysts and investors. Thus, heavy insider buying could mean that the people who are part of the business are bullish on its prospects.
