In this article, we will take a look at the 8 best insider trading websites in 2023. If you want to explore similar websites, you can also take a look at 3 Best Insider Trading Websites in 2023.
An insider is a person who has access to non-public or confidential information about a corporation. Insiders can include executives, board members, major shareholders, and other employees who have access to sensitive information that is not available to the public.Insider trading refers to the buying or selling of securities, such as stocks or bonds, based on material non-public information.
Insider trading is only illegal when an insider uses confidential information that is not available to the public to make a profit or avoid a loss by trading securities. Insiders are free to trade otherwise.Insider trading has proven to be one of the most underrated and successful stock market anomaliesof all time.There is a significant body of academic literature that has identified correlations between insider trading and abnormal investment returns.
A Review of The Profitability of Insider Trading
In 1968, Professors James H. Lorie and Victor Niederhoffer conducted one of the earliest academic researches to determine the profitability of insider trading. Their paper employed a rigorous methodology and demonstrated a strong correlation between insider transactions and abnormal returns. When tracking the returns on insider purchases, they found that when the number of buyers was at least two more than the number of sellers, insiders could generate above-market returns over a six-month period. The same was the case for tracking the returns for insider selling.
In 1974, Wharton professor Jeffrey Jaffe conducted a research to identify a relationship between abnormal returns and insider transactions. He constructed a zero investment portfolio that was long in companies with more insider purchases and short in companies with more insider sales in a given month. Though his study did not find any abnormal returns, even after constraining the sample to only large transactions of at least $20,000, when Jaffe employed an intensive trading criteria he found a strong correlation between insider trading and anomalous returns. When there were at least three buyers and three sellers from each company to be included in the long and short portfolios, respectively, Jaffe found abnormal returns of 5.07% in the first eight months following the transactions. Even when he included each company in the portfolio two months after the transaction, he still found abnormal returns of 4.84% in the first eight months. Hence, Jaffe's conclusion was that outsiders can also make abnormal profits by mimicking insider activity.
In 1976 Joseph Finnerty, a researcher at the University of Michigan, published a paper that established a correlation between insider trading and its returns. Finnerty did not employ an intensive trading criteria. He foundthat insider purchases had abnormal returns of 4.1% within the initial six months, and insider sales had abnormal returns of -2.4% within the same time period.
In 1986 Nejat Seyhun, a professor at the University of Michigan, conducted a study to evaluate anomalous returns tied to insider trading by taking into account the size of the company. He found that insiders in small companies exhibited more purchases than sales. Seyhun also found that insiders generated anomalous returns of 4.3% within the initial 300 days when insiders were net purchasers. He also found that insiders generated anomalous returns of -2.2% in the same duration for companies when insiders were net sellers. He pointed out that adopting intensive trading criteria produced similar outcomes. Seyhundiscovered that all types of insiders obtain statistically significant abnormal returns and there is a hierarchy that varies these returns. Seyhun found that major shareholders had the highest returns, and they were followed by officer-directors, and finally officers.His work suggeststhat insider type, company size, and transaction size are independent factors that influence the anomalous returns of insiders.
In 2001, Lakonishok and Lee conducted a studythat analyzed insider trading returns using data from all companies between 1975 and 1995. They also examined how aggregate insider trading could serve as a signal for stock market index movements. They discovered that the net purchase ratio was indicative of insider sentiment. They calculated the net purchase ratio for each month by subtracting sales from purchases and dividing by total insider transactions over 5 years. When the net purchase ratio was in the top quintile, insiders were the most optimistic and the stock market increased by an average of 21.2% during the following 12 months. On the other hand, when the ratio was in the bottom quintile, insiders were the most pessimistic and the stock market returned an average of 8.1% over the next 12 months. This suggests that aggregate insider trading has some predictive power for the future direction of the stock market.Furthermore, Lakonishok and Lee found that companies with extensive insider purchases outperformed those with extensive insider sales by 7.8% over the following 12 months. However, insider purchases were more prevalent in small and high book-to-market companies, while insider sales were more common in larger and low book-to-market companies. When adjusted for size and book-to-market effects, anomalous returns fell to 4.8%. This study indicates that insider trading is more informative in smaller firms.
In 2003, Leslie A. Jeng and Richard Zeckhauser from Harvard University, along with Andrew Metrick from Yale University, computed real returns of insider transactions without consensus data for insider transactions. These researchers calculated returns immediately after an insider executed a transaction, as opposed to when the trade was made public. They did not find a strong correlation between anomalous returns and insider sales, however, they did find a strong correlation between anomalous returns and insider purchases. The raw returns of insider purchases outperformed the market by 11.2% on an annualized basis. When adjusted for book-to-market effects and size, these returns beat the market by6.4% on an annualized basis.
In 2012a study conducted by Kaspar Dardas, a research assistant at the European Business School in Wiesbaden, Germany, found a strong correlation between insider transactions and abnormal returns. Dardas sampledEuropean insider transactions between January 2002 and December 2009 from 17 different Western European countries. Hefound that insider purchase transactions were associated with long-term positive excess returns, while insider sell transactions were associated with long-term negative excess returns. He also developed a method for identifying the most informative insider transactions, categorizing each transaction as a "low conviction", "medium conviction", or "high conviction" trade. The results showed that "high conviction" insider purchases generated an average 12-month excess return of 20.94% out-of-sample, while "medium conviction" purchases generated 1.32%, and "low conviction" purchases generated -3.40%.
Insider trading is a controversial practice because it gives an unfair advantage to those who have access to privileged information, and it undermines the integrity of the financial markets. Despite its controversial nature, insider trading has been highly profitable for those who have managed to comply with regulations and engage in it. As pointed out by the studies above, it may be lucrative for outsiders to try to mimic insider behavior by analyzing public information and trading on the same trends as them.
Consensus Criteria Reigns King
Tracking insider trading can be a useful tool for retail investors, but it's important to note that insider trading alone may not guarantee market-beating returns. As pointed out above, there are multiple independent factors that influence returns on insider trades differently. One of the simplest things investors can do is look at the number of insiders that are buying and compare it to the number of insiders that are selling in order to determine whether to go long or sell short. If a large number of insiders are buying shares of a company, it may indicate that they have a positive outlook on the company's prospects. The same applies for a large number of insiders selling shares. Investors can look for patterns in insider buying or selling, and check if consensus criteria is met. Additionally, investors can pay attention to significant transactions, such as large purchases or sales of shares, by insiders. These transactions may be indicative of insiders' confidence in a company's future performance.
In order to stay ahead of the market, understanding insider trading is key. Insider trading websites provide valuable insights into the buying and selling activities of corporate insiders, which can help you make informed investment decisions. We've compiled a list of the 8 best insider trading websites for 2023. These websites offer a wealth of information and tools to help you navigate the complex world of insider trading and make the most of your investments.
We conducted extensive research to identify a comprehensive list of potential insider trading websites. The websites were then evaluated using a set of criteria, such as the quality and frequency of updates to insider transactions data, the range of analysis tools available, and the user-friendliness of the website interface. We also took into account the subscription costs and duration of filings that these websites have records for. Based on these evaluations, the top 8 insider trading websites were selected and ranked according to their cost (primarily) and the duration of filings (secondarily). We have favored websites that offer free information over websites that offer paid services.
8 Best Insider Trading Websites in 2023
Number of Years of Insider Trading Data: 9
MarketBeat provides a powerful insider trading screener that allows investors to filter and sort insider trading data to identify stocks with bullish or bearish insider sentiment. Investors have access to insider transactions data as old as 2014. Additionally, MarketBeat allows investors to adjust filters including market cap, country, transaction size, and sector. Investors can also have access to three premium features with a subscription: MarketRank (MarketBeat's ranking), analyst consensus, and media sentiment. MarketBeat is one of the best websites for getting data for insider transactions.
Stocks that have clustered insider purchases in March include The Charles Schwab Corporation (NYSE:SCHW), Keurig Dr Pepper Inc.(NASDAQ:KDP), and Summit Therapeutics PLC (NASDAQ:SMMT).
Number of Years of Insider Trading Data: 19
GuruFocus offers a range of tools and resources for investors, including an insider trading screener. The GuruFocus insider trading screener allows investors to track insider buying and selling activity for US-listed companies, as well as international companies. Akey feature of GuruFocus' insider trading screener is its ability to analyze insider trades and provide users with insights about the trade. The screener provides detailed information about each insider trade, including the size of the trade, the insider's position in the company, and the date of the trade. This information can be used to evaluate the bullish or bearish sentiment of insider trading activity for a given stock. Investors can view insider transaction data for U.S. companies over the past year for free. In order to access data older than 1 year and check for insider transactions outside of the U.S., investors would have to subscribe to a payment plan. GuruFocus is one of the best websites for insider trading in 2023.
Number of Years of Insider Trading Data: 20
Benzinga is a financial media company that provides real-time news, market data, and analysis to investors and traders. One of its key offerings is its insider trading screener.The insider trading screener from Benzinga allows investors to track insider trading activity in real-time. The tool provides a list of companies with recent insider buying or selling activity, along with details about the transactions, such as the insider's name, the date of the transaction, and the number of shares traded. The screener has a history of insider transactions from 2003 till present, but it is for subscribers only. Benzinga is placed sixth among the best insider trading websites in 2023.
Number of Years of Insider Trading Data: 1
WhaleWisdom offers a user-friendly insider trading screener for investors to look up stocks insiders have bought or sold over the past 12 months. Apart from the screener's limitation to transactions over the past year, WhaleWisdom's screener allows investors to filter their screens by insider type, number of insiders, transaction amount, sector, and market cap among others.
Number of Years of Insider Trading Data: 2
Dataroma is a website that provides data related to the trading activities of hedge funds and insiders.Dataroma provides real-time insider transaction data. The website has a simple interface and allows investors to filter their queries by transaction type, transaction amount, and insider type as well. The website is limited to 2 years of insider transactions data. Dataroma is one of the best insider trading websites to use in 2023.
Insiders have poured millions into The Charles Schwab Corporation (NYSE:SCHW), Keurig Dr Pepper Inc.(NASDAQ:KDP), and Summit Therapeutics PLC (NASDAQ:SMMT) this March.
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Disclosure: None. 8 Best Insider Trading Websites in 2023is originally published on Insider Monkey.
I am an expert in finance and securities trading with a deep understanding of insider trading practices. My knowledge is based on extensive research, academic studies, and practical experience in the field. Now, let's delve into the concepts discussed in the article about the best insider trading websites in 2023.
Insider Trading: Insider trading involves the buying or selling of securities, such as stocks or bonds, based on material non-public information. It becomes illegal when insiders use confidential information for personal gain or to avoid losses.
Academic Studies on Insider Trading:
Lorie and Niederhoffer (1968): Found a strong correlation between insider transactions and abnormal returns. More buyers than sellers led to above-market returns over a six-month period.
Jaffe (1974): Discovered a correlation between abnormal returns and insider transactions. Notable results were found with intensive trading criteria.
Finnerty (1976): Established a correlation between insider trading and returns, with abnormal returns for both purchases and sales.
Seyhun (1986): Explored anomalous returns tied to insider trading, considering the size of the company. Differentiated returns based on insider type, company size, and transaction size.
Lakonishok and Lee (2001): Analyzed insider trading returns and their impact on stock market index movements. Found that net purchase ratio indicated insider sentiment and could predict stock market direction.
Jeng, Zeckhauser, and Metrick (2003): Explored real returns of insider transactions, with a strong correlation between anomalous returns and insider purchases.
Dardas (2012): Found a strong correlation between insider transactions and abnormal returns, categorizing transactions based on conviction level.
Insider Trading Websites: The article lists the top 8 insider trading websites for 2023, providing insights into their features and capabilities. Notable ones include MarketBeat, GuruFocus, Benzinga, WhaleWisdom, and Dataroma.
Consensus Criteria: The article emphasizes the importance of considering multiple factors, including consensus criteria, when tracking insider trading. It suggests that insider trading alone may not guarantee market-beating returns, and investors should analyze patterns, significant transactions, and consensus criteria.
Stocks Mentioned: The article mentions stocks heavily bought in March 2023, including The Charles Schwab Corporation (NYSE:SCHW), Keurig Dr Pepper Inc. (NASDAQ:KDP), and Summit Therapeutics PLC (NASDAQ:SMMT).
Methodology: The article outlines the methodology used to select and rank the best insider trading websites. Criteria include the quality and frequency of updates, range of analysis tools, user-friendliness, subscription costs, and duration of filings.
In conclusion, the article provides a comprehensive overview of insider trading concepts, academic studies, and the top insider trading websites, offering valuable insights for investors looking to navigate the complex world of securities trading.