A Winning Combination for Value-Seekers

Today I want to continue looking at insider trading in combination with other factors. A lot of research has been done on fundamental factors and on insider trading, but so far it seems that only H. Nejat Seyhun, now of the University of Michigan, has done a lot with combining those elements.

In his book Investment Intelligence From Insider Trading, Seyhun examined insider buying in stocks that trade below book value. He found that high book-to-market ratios (low price-to-book ratios) were predictive of future returns and outperformed high book-to-market stocks by a wide margin. He also found that monitoring insider trading could help outside investors predict future performance. In my many years of practice I have found this to be true, and I have a higher degree of conviction when buying cheap stocks that have insider buying....604 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

Read the full story and get access to the Real Money Pro trading floor.

There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.

Already a Subscriber? Please login.

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.