Distinguishing a Contender From a Pretender

A metric to consider when looking at small cap stocks is insider buying. More importantly, cluster buying.

Cluster buying happens when more than three “C-Level” (CEO, CFO, CIO, etc.) and directors buy up substantial amounts of shares in a relatively close period of time.

And these have to be substantially large.

If a CEO buys 100,000 shares of a stock trading at $0.20 (a $20,000 investment) this is not what we’re talking about.

We want it to be large and hopefully more than their compensation.

If you find multiple C-Levels buying $300,000 or more worth of shares in the underlining stock, then you’ve found the cluster buying we’re talking about. A helpful tool to track insider buying and selling is insiderinsights.com; they have a daily headline list of all insider transactions.