InsiderInsights Company Ratings
Insider activity is a behavioral data flow that has been proven profitable to analyze for investment intelligence.
Used properly, it is a great, time-saving tool for identifying new potential investments of all styles, both long and short.
That said, most insider trades are not significant, and represent mere noise to be ignored.
To assist our clients in making the most of our already value-added insider data, InsiderInsights rates a company's insider
profile for "Significance".
InsiderInsights automated, real-time Expert System rates the "Significance" of a company's insider profile based on numerous criteria, including:
Size of insider transactions in terms of both dollar value and the percentage change in an insider's holdings;
How many insiders are acting similarly (eg. clusters or activity);
The track record(s) of the insider(s) trading;
Whether and how executives are also trading other stocks they are insiders at;
Whether a lack of trading may represent significant behavior;
The overall acceleration or deceleration of insiders' activity, including reversals of opinion;
The price action of the stock insiders are trading; ...and other proprietary behavioral measures.
When analyzing an insider's track record, our Expert Ratings System also takes into account the full range of
Insider Statistics regarding their historical trades--not
just the average returns that lesser scoring methodologies rely on. An executive with a decent historical average return is nice to identify, but that
behavioral intelligence is incomplete without knowing the "Hit Rate" and overall distribution of the insider's performance.
The InsiderInsights Company Ratings that result are considered "active" for 3 months, or until replaced by another Rating due to subsequent insider activity.
Our Ratings represent a powerful and effective Quantitative Insider Metric for Data Module clients to incorporate into their
InsiderInsights Company Ratings are also presented in clients' ticker-based insider histories in an intuitive numerical and visual scale, as follows:
Some Significantly Bullish and Bearish Ratings are clearly stronger than others. Reasons for a Significant Rating garnering 2 or 3 colored icons instead of just one include:
clusters of insiders acting similarly; insiders having very predictive track records (as per our Insider Statistics); large $ value transactions and trades resulting in large changes in holdings;
transactions that represent reversals of opinion, and; many other proprietary metrics and behavioral factors.
Despite computing and relaying different strengths of Significant insider signals, however, we do not purport that a +3 or -3 Significance Rating
is three times more likely to be correct, or is more likely to result in a larger stock move. Our back tests and experience indicate that the major
alpha generation comes from the fact that a stock's insider activity has surpassed our calculated threshold of "Significance". The strength of Significance is less important.
It is further valid to consider stocks with Ratings that are merely Leaning Bullish or Leaning Bearish in your long and short analysis, as these Ratings
have also proved to generate alpha, though less than Significant Ratings.
Ratings should also be interpreted in concert with a stock's price action. It is normal behavior for insiders to buy when their stock has fallen in price,
and sell when it rises sharply. So even an Insignificantly Bullish Rating on a stock that has doubled, or Insignificantly Bearish Rating on a stock that has
halved in price imparts intelligence.
InsiderInsights Company Ratings have also been independently validated by an unsolicited and uncompensated
White Paper from Lucena Research.
Lucena's conclusion from their extensive analysis is that InsiderInsights Company Ratings have "persistent and meaningful value".
Our own study of all the performance statistics associated with each Company Rating prominently displayed in our Premium Insider Histories concurs.
So what are you waiting for?
The Next Generation of Insider Trading Analytics is here, and available for less than you're paying for inferior products.
Give us a call at (212) 784-6860, and let us give you a tour.
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