A common fallacy among inexperienced and uninformed investors is that all insider trading is illegal. Nothing could be further from the truth: corporate insiders can buy and sell shares of their companies legally as long as they play by the rules imposed by the U.S. Securities and Exchange Commission and do not trade on material non-public information. Numerous research studies focused on estimating the returns earned by corporate insiders conclude that insider purchases earn abnormal returns of more than 6% per year. The actual percentage amount is irrelevant, but this piece of information shows insiders’ moves are worth monitoring.
A few people would disagree that information is very valuable commodity. Corporate insiders usually have a great deal of information; a lot more up-to-date and useful information than the second-hand information possessed by outsiders such as journalists, hedge fund managers and Wall Street analysts. Moreover, it’s not just the knowledge that makes corporate insiders so successful at trading their company’s shares. Their contrarian approach to investing combined with the superior knowledge about their companies, enable corporate insiders to earn good trading profits. With that in mind, let’s have a look at a set of noteworthy insider transactions reported with the SEC on Wednesday.
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Board Member at Provider of Privacy Protection Services Buys 200k Shares
Let’s kick off our discussion by looking at a massive insider purchase at Intersections Inc. (NASDAQ:INTX). David A. McGough, a director since August 1999, bought 200,000 shares on Friday at $3.40 apiece, boosting his ownership stake to 707,250 shares.
The provider of identity risk management and privacy protection services for consumers has seen its market capitalization rise by 56% in the past 12 months. Intersections Inc. (NASDAQ:INTX)’s shares surged in early December, when the company’s Board of Directors announced a decision to close the Pet Health Monitoring business. This business segment used to provide health and wellness monitoring products and services for veterinarians and pet owners. Since the Pet Health monitoring segment was not generating sufficient revenue to cover operating expenses, the Board’s decision meant the company would not burn cash to sustain an unpromising business. Earlier this week, Intersections announced it had sold the membership interest in wholly-owned subsidiary Captira Analytical LLC in an attempt to focus on identity and privacy protection. Captira Analytical offers automated solutions to the bail bonds industry. John H. Lewis’ Osmium Partners reported owning 3.46 million shares of Intersections Inc. (NASDAQ:INTX) in its 13F filing for the fourth quarter.
On the second page of this insider trading article, we discuss fresh insider buying at two other companies.