Follow the Pack

In addition to tracking the buying and selling activity of a company's top two executives (as I wrote about on Tuesday), I also pay attention to cluster buying by officers and directors in their companies' stocks. This type of activity has been associated with positive returns and outperformance for years and is one of the few market anomalies that has not been arbitraged out of existence over time.

Officers and directors participate in the board meetings, see the reports and hear the plans for the future of the business. When several of them are buying shares of stock on the open market, it just makes sense to pay attention. James Lorie and Victor Niederhoffer first documented the impact of cluster buying in the 1960s and many have found it to be a winning strategy....660 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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