[RESEARCH] Do stocks outperform when insiders buy the dip? [academic research] Seyhun wrote a few papers a book called “Investment Intelligence from Insider Trading” in the 90s that found that insiders are contrarian investors (buy low, sell high) and that insiders outperform. He also found that aggregate insider trading data is able to predict future stock market performance (the basis for our insider sentiment score) Lakonishok & Lee (2001), “Are Insider Trades Informative?” reaffirmed these findings and found that insider purchases outperform even after controlling for valuation Jenter (2003), “Market Timing and Managerial Portfolio Decisions” found that insiders buy when they believe the market is fundamentally undervaluing their company Lasfer (2024) - "Corporate insiders' exploitation of investors' anchoring bias at the 52-week high and low" found that insiders do significantly more buying at 52-week lows and way more selling at 52-week highs, but their purchases at both the 52-week high and low significantly outperform [ceo watcher research] The CEO Watcher database has all insider trades back to 2009. Before any analysis (unless otherwise noted), we remove all scheduled trades (Employee Stock Purchase Plans, Tax Sales, 10b5-1 Plans, Dividend Reinvestments, etc) and all Public Offerings, Private Placements, and Purchase Agreements. We also remove any erroneous trades (mismatching transaction codes, when the filing date is more than one month after the transaction date, etc) and any super small trades (<$5,000). Looking at insider purchases after one-month stock price dips, you’ll see that dip buys outperform the S&P across all timeframes (next 1M/3M/6M/1Y) with improving performance as the dip size increases. (image 1) These returns are more volatile than the S&P, which we can see by looking at the median returns. The S&P mean and median returns are very similar (as expected), while the median return for insider dip buys falls a bit due to some insider dip buys that massively outperform, pulling the mean up. However, for dips greater than 20%, the median dip buy still outperforms the S&P. (image 2) Unlike much of the academic research, which finds that insider purchases only outperform for small caps (generally speaking, not necessarily for dip buys), we see significant outperformance for both small and large caps after dip buys. (<$2B mkt cap is small cap, >=$2B is large cap). (images 3 4) The data also has fairly large sample sizes, with the bottom end ranging from 868 purchases for the Large Cap 1m_ago < -30% group to 7126 for the All Cap 1m_ago < -30% group (the most restrictive 1m cutoff). [appendix] I'm going to respond to this post with different cuts of the data. Feel free to ask for any specific cut you would like to see

A bunch of insiders bought the dip at GeneDx Holdings $WGS last month Up over 50% from when they started buying

Insider buying at Health Equipment companies is creeping up while the Medical Devices ETF is flattening out

The insider dip buys at Lumexa Imaging Holdings $LMRI have gone well. Up nearly 40% in a month

A director at Krispy Kreme $DNUT bought the stock a few times over the last couple of weeks. He is already up ~25% on those purchases

$CAVA up 25% in one week after the COO made this unscheduled purchase x.com/CEOStockWatcher/status…

This exec nailed the bottom at Alignment Healthcare, Inc. $ALHC Up 40% in just a couple of weeks x.com/CEOStockWatcher/status…

A well-timed purchase by $AMC CEO a month ago (and the first insider trade by anyone at $AMC in three years). Stock is up over 50%

Director (FRATER HUGH R) at Better Home & Finance $BETR purchased $125.35K (3rd largest purchase, out of 4). This increased their listed holdings by 437%. Dip Buy: the stock was down -22% in the last 1m. 3 other insiders also purchased the stock in the last 30 days.

Chief Executive Officer at Nerdy Inc. $NRDY purchased $199.31K. Dip Buy: the stock was down -50% in the previous year.

CEO at Navios Maritime Partners L.P. $NMM purchased $252.70K (9th largest purchase, out of 25). This insider has purchased the stock 8 times in the last 30 days.

Another insider buying Ryan Specialty Holdings $RYAN Director (ROGERS JOHN W JR) purchased $263.73K (8th largest purchase, out of 20). Their last purchase was 1779 days ago. 3 other insiders also purchased the stock in the last 30 days.

Director (Waugh Seth H.) at Yext, Inc. $YEXT purchased $498.22K (largest purchase ever, out of 2). This increased their listed holdings by 71%. Dip Buy: the stock was down -30% in the previous 3 months. Their last purchase was 629 days ago.

Director (ALFRED MICHAEL) at Bakkt, Inc. $BKKT purchased $2.17M (2nd largest purchase, out of 2). This increased their listed holdings by 42%. Dip Buy: the stock was down -22% in the previous month. This insider has purchased the stock 2 times in the last 30 days.

Another dip buy at American Integrity Insurance $AII 10% Owner (SOWELL JAMES E) purchased $2.30M (first-ever purchase). 3 other insiders also purchased the stock in the last 30 days.

Insiders keep buying Matador Resources $MTDR Chairman and CEO purchased $106.14K. 4 other insiders also purchased the stock in the last 30 days.

Director (GARDEN EDWARD P) at Fortune Brands Innovations, Inc. $FBIN purchased $12.99M (22nd largest purchase, out of 42). This insider has purchased the stock 3 times in the last 30 days.

Head of Strategy at StepStone Group Inc. $STEP purchased $5.02M (largest purchase ever, out of 3). Dip Buy: the stock was down -23% in the previous month. Reversal: they made 4 straight sales before this purchase. Their last purchase was 1102 days ago.

Today’s 5 largest unscheduled insider purchases (Thu, Jun 11): 1) Director (Troim Tor Olav) at Borr Drilling Ltd $BORR purchased $5.00M (largest purchase ever, out of 3). Dip Buy: the stock was down -22% in the previous month. 2) Director (Haveli Investments, L.P.) at Blend Labs, Inc. $BLND purchased $1.88M (9th largest purchase, out of 16). Dip Buy: the stock was down -53% in the previous year. This insider has purchased the stock 6 times in the last 30 days. 3) Chief Operating Officer at MP Materials Corp. / DE $MP purchased $543.00K (2nd largest purchase, out of 8). Dip Buy: the stock was down -20% in the previous week. This insider has purchased the stock 2 times in the last 30 days. 4) Director (Sousa Mauad Bruno) at Aura Minerals Inc. $AUGO purchased $521.43K. Dip Buy: the stock was down -34% in the previous month. This insider has purchased the stock 3 times in the last 30 days. 5) Director (Carucci Richard) at V F CORP $VFC purchased $515.01K (3rd largest purchase, out of 16). Their last purchase was 379 days ago.

Some more dip buying at PicS NV $PICS A director (Batista Costa Jose Antonio) purchased $202.38K (largest purchase ever, out of 4). Dip Buy: the stock was down -20% in the previous month. 1 other insider also purchased the stock in the last 30 days.

Chief Financial Officer at D-Wave Quantum Inc. $QBTS sold $1.34M (7th largest sale, out of 8). 4 other insiders also sold the stock in the last 30 days.