Here’s why this old website is a powerful tool that enhances your investing prowess! [Wednesday: The Independent Investor]
Miles Everson’s The Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.
A Note from Miles Everson:
Greetings!
We’re excited to share another investing insight in today’s “The Independent Investor!”
Every Wednesday, we publish articles about investing because we believe this activity can help you achieve true financial freedom through wealth creation.
Today, we’ll talk about a website that provides lots of data to institutional investors and why you should use it too.
Do you want to learn more about this website?
Keep reading to know more!
Miles Everson
CEO, MBO Partners
Chairman of the Advisory Board, The I Institute
The Independent Investor
Institutional investors, to grow and protect their investment portfolios, need access to information that would allow them to gain insights about a particular stock and the whole market.
One of the ways these institutions go about this is by visiting an old and obscure website that contains some of the most useful information available investors can make use of.
The website’s name?
Photo from secform4
Even though the secform4.com website doesn’t provide extensive research, it serves as a valuable resource for Wall Street professionals. In fact, the information found on this web database is so powerful that it can change how investors view the entire market.
How, you may ask?
Whenever an individual, a.k.a., an insider, within a company buys or sells stock, the U.S. Securities and Exchange Commission (SEC) requires the transaction to be reported in what’s called the Form 4. Subsequently, these filings are made available to the public on the secform4.com website.
According to Rob Spivey, the Director of Research at Valens Research and Altimetry Financial Research, the information found in the Form 4 filings of companies can help investors identify buying and selling opportunities in the market.
Aside from compiling filings, the secform4.com website can analyze results as well. According to Spivey, the analyses found on the website aren’t surprising most of the time. After all, management teams tend to buy stock at cheap prices and sell when it’s expensive.
To further illustrate secform4.com website’s ability to provide investors with insights related to buying and selling stock, let’s take a look at the chart below:
Photo from Altimetry
The chart displays the daily ratio of buy and sell filings from public Form 4 data. A higher ratio indicates an increase in insider buying activity, a signal that management teams are bullish in their sentiment.
On the flip side, a lower ratio indicates more selling, implying that management is bearish on their sentiment.
As seen from the chart, the S&P 500 index took a nose dive in early 2020 while the insider buying surged!
Simply said, management teams knew that the stocks of their respective companies were cheap, so they capitalized on that buying opportunity.
Of course, it should be noted that the scenario we highlighted above doesn’t happen ALL the time.
Every once in a while, something different happens:
Stock starts dropping but management isn’t buying, or it keeps surging higher while insiders continue to buy.
When stocks are bought even though prices are soaring, this means that insider sentiment about a company is very high. As a result, management teams will keep buying regardless of the financial cost.
On the other hand, when insiders refuse to buy even though shares are on the cheap, this means that there are concerns about a firm and the overall macroeconomic outlook.
So instead of putting their money at risk, insiders would rather wait and see even though the market is dropping.
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As we’ve discussed above, the secform4.com website is a very powerful tool in helping investors make well-informed investment decisions.
By publishing and tracking Form 4 filings, the website enables its users to understand the outlook that management teams have for their respective firms. Armed with that valuable insight, investors will know when to unload or buy stocks.
In an uncertain economic environment and an unpredictable market, having the ability to know when to drop a stock or not is a huge difference maker for both seasoned and novice investors.
So, if you want to improve your investing prowess and make well-informed decisions, keep the secform4.com website and other tools like it in mind whenever you survey the market for opportunities!
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
About The Dynamic Marketing Communiqué’s
“Wednesdays: The Independent Investor”
To best understand a firm, it makes sense to know its underlying earning power.
In two of the greatest books ever written on investing, the “Intelligent Investor” by Benjamin Graham and “Security Analysis” by David Dodd and Benjamin Graham (yes, Graham authored both of these books), the term “earning power” is mentioned hundreds of times.
LITERALLY.
Despite that, it’s surprising how earning power is mentioned seldomly in literature on business strategy. If the goal of a business is wealth creation, then the performance metrics must include the earning power concept.
Every Wednesday, we’ll publish investing tips and insights in accordance with the practices of some of the world’s greatest investors.
We make certain that these articles help you identify and separate the best companies from the worst, and develop your investing prowess in the long run.
Our goal?
To help you get on that path towards the greatest value creation in investing.
Hope you’ve found this week’s insights interesting and helpful.
Stay tuned for next Wednesday’s “The Independent Investor!”
Cheers,
Kyle Yu
Head of Marketing
Valens Dynamic Marketing Capabilities
Powered by Valens Research
www.valens-research.com
