Wise investors covet insider stocks to buy because they realize something very important.
It's something mutual fund legend Peter Lynch once described very succinctly: "There are many reasons why insiders sell, but only one reason insiders buy." That reason being, of course, that insiders know something about their company that they are certain will drive the stock price higher.
And research bears this out.
According to Nejat Seyhun, a professor and researcher in the field of insider trading at the University of Michigan, whenever you have insider buying, the stock tends to outperform the total market by 8.9% over the next 12 months.
When you have an indicator that consistent and that profitable, it's crazy not to take advantage of it.
Insider Stocks to Buy: LAYN, CLMS, OPK
So far in 2014 we have seen some interesting activity by corporate insiders. Early on, the sellers have the edge, but there has been no cluster insider selling.
That makes the significant insider buying by officers and directors even more interesting, however.
Just take a look at these three insider stocks to buy now:
Insider Stock to Buy No. 1: Layne Christensen Co. (Nasdaq: LAYN): Layne is a water management, construction, and drilling service business in North America. The company's customer base includes government agencies, utilities, industrial and mining companies, engineering firms, heavy civil construction contractors, oil and gas companies, power companies, and agribusiness.
Chairman of the Board David Brown spent more than $330,000 to pick up an additional 20,000 shares in the first week of the year.
The move raises eyebrows because LAYN has been hit hard in the past year. Shares have fallen by more than 20% over the past year, and the company has fallen short of Wall Street estimates four quarters in a row. Brown apparently sees a rebound ahead.
Insider Stock to Buy No. 2:
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