Insider Buying

Why Follow Insider Buying?

Since the 1970's, the SEC has published monthly data on the purchases and sales of Corporate Insiders, also known as 144 or 13D holders. On July 30, 2002 the Sarbanes Oxley Act was signed into law requiring corporate Insiders to inform the public of their purchases, sales, or intention to sell within 48 hours of doing so. Through Insider Alert, we seek to identify those Corporate Insiders who have a documented track record of investing in their own company.

The objective of Insider Alert is to identify those Corporate Insiders who have demonstrated a successful track record of investing in their own company. It is those Insiders who have a superior understanding of the intrinsic value of the companies for which they work as they are aware of the reasons for a company's past performance, present outlook and future opportunities. We call them the Smart Money.

Insiders are persons associated with a company at a senior or control level and are normally prohibited by law (Short Swing Profit Rule) from selling their shares for at least 6 months after an open market purchase therefore each investment is a sign of belief and commitment by the Insider. Insider sellers tend to be less predictive than Insider buyers.

Insight, Information, and Price Performance - are three general categories that all data elements could essentially be grouped in to when tracking Insiders. Insider Alert looks for: Insiders with successful track records; Clusters or multiple Insiders purchasing in the same time frame; Previous sellers becoming buyers; Direct open market cash purchases; Investment size.

Our view is that the significance of Insider activity on the buy side is much more significant than on the sell side. There are numerous reasons to sell including financial planning, lifestyle changes, and diversification. In contrast we believe there is one motive for Insiders to make open-market purchases of their own stock, and that's the Profit-Motive. Insider Alert focuses on filed, open-market purchases, and not option related transactions.

Important points regarding Insider activity in their own stock include: transactions tend to be early in an anticipated long-term investment horizon (Insight); activity by high ranking officers is more important than officers not involved in day-to-day operations (Information); and Insider track-record of timing the purchases (Price Performance).

The importance of the data points is simple. We consider open market purchases by high-ranking financial officers are considered informed-buys because the investor is a corporate decision maker. We consider trade volume and frequency as indicators of insider belief and timing. Price performance confirms a proper decision to buy. Consistency measures the quality of insider ability to pick entry points.

We believe that Insider Buying constitutes Insider belief in the value of their stock. In assessing an Insider transaction, Insider Alert makes no correlation to either fundamental or technical measures because identification is strictly contingent on the Insider's historical returns. The existence of strong underlying fundamentals can possibly validate Insider purchases.

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The Insider Alert is a program of Ladenburg Thalmann & Co. Inc.. Brokerage and Investment Services are offered through Ladenburg Thalmann & Co. Inc. Member NYSE, NYSE Amex, FINRA and all other principal exchanges. Member SIPC. Ladenburg Thalmann’s parent company, Ladenburg Thalmann Financial Services Inc., is traded on the AMEX under symbol LTS.

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Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Investors must make their own determination as to the appropriateness of an investment in any securities based on their specific investment objectives, financial status and risk tolerance. This information is without regard to specific investment objectives, financial situation and particular needs of any specific recipient of this information.