The power of “insider” trading

Don’t get me wrong and I’m fully aware that it is illegal to do real insider trading. So never never try this if you know some actual insider information and act on it for your gains. I have known personally some colleagues over years who were convicted and put in jail for insider trading. It is just not worth it to take this kind of risk. So let’s be very clear about this first!Nevertheless, we may get fairly good “insider information” without actually knowing what it is. Sounds odd, isn’t? Well, I have written this before. Basically, by watching what the real insiders are doing with their own money for their own company stocks, especially with respect to buying stocks, we may get a good leading indicator something positive may be coming for the company and for the stock accordingly. Of course there is no guarantee for sure, especially regarding the time duration when the positive insider positives will be reflected in the stock price. But at least we know those knowing the business insider and out feel good about their stocks and are willing to buy even though outsiders are actively selling. This kind of insider buying, if in enormous amount, could sometimes mean explosive jump for the stock. I have a real example just happened this week.

If you don’t know what happened yet for the biotech giant, Biogen (BIIB), there is the backstory. It faltered sharply a few months ago when it disclosed that their leading candidate for Alzheimer’s disease, aducanumab, had failed the predefined futility analysis. Since this was one of the major hopes for the company from the street that supported its hyped stock prices, it got instant haircut by over 20%. Well, it turned out this is not the end of this story. To everyone’s surprise, the company announced last week that it will submit the NDA application for seeking an approval for the drug that was once already having the death sentence. The stock immediately jumped 20% following the news. Apparently the company has been doing a lot of working by reanalyzing the data and discussing with the FDA and finally they concluded that the result is still good for submission. Considering the FDA was consulted all along during this process, apparently it means the FDA also values the study result, which is a good sign for the drug’s fate. Of course it does not mean any guarantee that it will get the approval as the FDA may still reject after a more thorough review. I bet likely this review will require an Advisory Committee Meeting.

But whether or not it will get an approval is not the point of my discussion here today. What is truly amazing to me is how the real insiders have already sent a very clear signal weeks before that something major and positive may be coming. Weeks ago I got the notification from my sources that there was a huge insider buying for BIIB and the amount for this one was really impressive. We are not talking about a million or something but nearly 30 times more by one important insider, a board member. Though not as much but the CEO was also buying big in million dollars. Here are the two major insiders who were buying the stock like crazy. While no one like me and anyone else outside the company would know what was really going on, it was really a very strong sign that some major development was ongoing for the company that may be great for the stock that was on sales. It turns out this is indeed the case. So next time pay attention to such kind of insider buying. Most often than not, it is positive for the stocks in the weeks or months ahead. This will be one type of information, the legal “insider information”, I will be sharing with my DW Family when I see it or know it. As a matter of fact, I just shared one stock with the major insider buying in the similar scale.