When it comes to stock ownership, the company can go about a few different ways in which they own/sell their shares. Now a typical company issues shares to the public, so the entity can raise money through their shareholders in a sense. What are some of the traits we look for in companies for potential long term plays? Below we will go over a couple traits we look for when assessing a company we may think about investing in for the long term. Now there are obviously many many ways to look at companies for the long term, but here is a simple way some people may look for potential opportunities for the longer term. This post is very basic, but as we progress in future posts we will go much more in depth!
Company Insider Ownership
Not only can people like me and you buy shares of a company, but company insiders (CEO, Directors, Officers) can buy their shares as well. This is something that tends to be overlooked when assessing companies. Say you are the CEO of your own company and you are publicly traded. Would you rather issue all your shares to the public or buy some of your shares? Well this would most likely come down to how confident you are in your business. Now there are many investors out there that follow insider transactions. They look for scenarios where leadership is either buying or selling their shares. Buying could signal potential growth of the company in the near future, where selling could indicate leadership losing interest in the operations or believing the future doesn't look as bright as it once thought. Leadership such as CEO, Directors and Officers obviously know the most about their company. They usually know more than the public does, because duhhhh it's their company. With this being said, it's a reason many investors look for scenarios where leadership is either buying or selling their own shares. Every time leadership has a stock transactions this is always public information that you can see on various sources such as filings with EDGAR or websites that publish the data. Below is an example!
As you can see from above, these are some real examples of recent insider transactions. All three of these examples above are examples of leadership buying their shares. Now like we mentioned before, it's also public information when leadership sells their shares. Now you may be asking yourself, how in the world do I find this information? There are plenty of sources that offer this public information. Sites like Finviz (See this Link) provide investors with this information each day.
Conclusion
When you start looking for stocks it can be a stressful process right? The reason for this is because there are just so many stocks out there and how are you supposed to know which ones to look at? Well this is one of the many methods some investors use. They will try to follow the companies that have shown strong insider buying as of recent. Even though it's not an exact science, it could potentially be signaling the leadership within the company seeing a bright future. Looking at stocks through this method is at least a good starting point in this complex hobby!
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