IFB155: June Q&A – Insider Trading and Investing Like Peter Lynch

Announcer (00:00):

You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern. To decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now.

Dave (00:36):

All right, folks, we’ll welcome to Investing for Beginners podcast. This is episode 155 tonight. Andrew and I are going to take a moment, answer some listener questions. We got some great questions recently, and we thought we would take a few minutes, which, who are we kidding. It’s going to be longer than a few minutes and answer some of those questions for you guys. So I’m going to go ahead and turn it over to Andrew. He’s going to go ahead and read our first question to us. So Andrew, why don’t you go ahead and take us away, big guy?

Andrew (01:01):

Yeah, let’s do it. So this one is from Alex. He says either question about inside their training metrics, several websites keep track of inside their training, not the illegal kind. And I was wondering what you thought about this qualitative metric. Is there any data showing inside their training as being indicative of a stock’s future performance or anything you’ve noticed from your personal experience? So, Dave, I know you just wrote a blog post about this, coincidentally, so you’d be the man to answer this one.

Dave (01:33):

Okay. Yeah. Thank you. So yeah. Alex. Yeah, that’s a great question. So there is no specific metric that I’m aware of that will tell you that this is a bonus for the company to drastically improve their stock performance because insiders are trading on the company. Generally, if you see an insider, we’re talking about, let’s back up for just a second. So insiders, what are insiders considered any sort of management that’s involved in the company? Most people think of more of the upper-level management, like a CEO, CFOs CEOs, people of that nature, like the C suite kind of people. Still, it also does involve a district manager vice presidents, lower-level managers of that elk. So anybody that has a substantial amount of wealth tied up in the company. Part of the shares that they get for compensation for working for the company.

Dave (02:40):

so Isn’t, it, it doesn’t correlate to, let’s say a private banker, our banker that works at Wells Fargo. That’s investing his 401k in a company. It’s not that it’s more about the stock options that are given to an employee as a form of compensation or pay for the employee. So when they exercise those options, that’s considered insider trading. There, they call it insider trading because they’re insiders. They work for the company.