Not a Growth Stock Yet

In late February, Terex (TEX) board member Paula Cholmondeley directly purchased more than 3,500 shares of the $3.6 billion market cap construction machinery company's stock for $33.10 per share. In general, we believe that insiders should avoid buying shares of their company's stock, since they are already sensitive to company-specific risks and could therefore benefit from diversifying their wealth.

Therefore, when insiders buy, they must have a level of confidence that goes beyond the general bluster that "this will be a great year for us." On average stocks bought by insiders do narrowly outperform the market. Cholmondeley, for example, bought more than 5,000 shares of Terex in June 2012 at prices around $18.25. Although this purchase has earned a high return, of course this is not a typical result of insider activity....496 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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