Mastering the Art of Insider Trading (Without Being an Insider)

Delray Beach, Florida – I recently came across some eye-popping research by Dr. Kenneth R. Ahern.

He’s an associate professor of finance and business economics at the University of Southern California.

In a paper soon to be published in the Journal of Financial Economics, he confirms what many of us have long suspected…

Wall Street’s insiders have a clear advantage over the little guy.

The focus of Ahern’s research was squarely on illegal insider trading tips.

He found that corporate insiders make use of tight social networks to share with one another their knowledge of upcoming corporate events… events that could have a significant impact on a company’s stock performance.

Admittedly, that’s not quite breaking news.

Cronyism is to Wall Street as bribery is to third-world politics.

But what caught my attention was just how profitable these insider tips are…

According to Ahern, insiders who trade their companies’ stocks invest an average of about $200,000 per tip… and walk away with about $72,000 in profits.

These tips include foreknowledge of mergers and acquisitions, results of clinical trials, regulatory announcements, CEO turnovers, and so on.

“Other” events include announcements such as analyst reports, dividend increases and the addition of the company’s stock to an index.

When insiders trade on these tips, they produce huge gains in 21 days, on average. In the case of clinical trial/drug regulation tips, it takes an average of just nine days to achieve those gains.

Ahern also found that insiders’ returns grow bigger the closer they are to a central or key source of information… like the company’s CEO or members of its board.

Those closest to these key insiders – such as family, friends and regional business colleagues – earn greater gains than further-removed insiders.

So what’s the lesson here?

It pays to be in the know.

The fact that many people are willing to risk getting caught in order to make quick and easy money just goes to show how profitable this activity is.

But these findings also raise a larger question…

If the cards are so clearly stacked against outsiders, how can we expect to win?

If You Can’t Beat ’Em, Join ’Em

Of course, I’m not here to encourage anything illegal.

Truth be told, not all insider trading is against the law.

That’s why the SEC requires corporate insiders to report their transactions. It’s to ensure that they can’t monopolize on their insider information in a way that’s unfair to outsider shareholders.

And while you’ll never have quite the same access to forthcoming information as the insiders do, following their trails can open a window into what the smart money is up to.

And if you can follow the money carefully, you can make better-informed and less risky trades.

Because, as I said before, it pays to be in the know.

The next best thing? Follow those who are.

Profit on the Smart Money’s Winning Edge

Investors who track and capitalize on the activities of corporate insiders are very smart to do so, as Ahern’s findings suggest.

So what’s the deal? Why do so few investors follow the smart money?

The answer might be that not all insiders are market wizards.

You see, it’s not enough to track the insiders… Investors have to track the right insiders.

Because, as Ahern’s research makes clear, not all insiders are privy to the same quality of information at the same time.

Information spreads over time… but as times goes on, that information becomes less and less reliable. Think of it as a game of telephone.

And while most insiders might know more than the common investor, they don’t always know how the markets will act.

To be successful, one must identify the top insiders… those with a penchant for turning their information into money.

Last Friday, Chief Investment Strategist Alexander Green rightfully pointed out just that.

“It’s not important whether there is widespread insider buying. What matters is which insiders are buying how many shares at which companies,” he said.

He’s absolutely right.

The most important work is to uncover which insiders have a record of success and to pay close attention to where they are placing their money.

If you can do that, you’ll have a clear advantage over the average investor.

Like Ahern, Alex and our Research Team have been working diligently to dig deep into the inner workings of Wall Street’s elite insiders… We refer to them as Wall Street’s “100% Success Club.”

And Alex has uncovered some startling data that’s sure to result in some incredible profit opportunities in 2017.

Alex will be sharing his findings with Members in a free webinar at 1 p.m. EST on Wednesday, April 12. To learn more about the webinar and claim your spot, click here now.

And hurry! Spots are filling up fast.

Good investing,

Anthony