InvestorQ : Can insiders give the best clues about the stock?
Nishita Gala made post

Can insiders give the best clues about the stock?

Sadaf Khan answered.
3 years ago

Informed traders give you the best clues about any stock. Back in 2009, before Satyam owned up to its massive accounting fraud, a group of very large institutions had been silently offloading their long positions in the stock. Not only some of the men in the know exited the stock, but many also made a fortune by short selling the stock just before its disastrous fall from grace.

Satyam may have been the most egregious case, but it is hardly an isolated case. In fact it has happened in other large companies too. For example shortly before Crompton Greaves had announced its disastrous quarterly results about 3 years ago, the data showed offloading by directors of the company. Even in case of L&T the selling by informed sources was visible ahead of the 50% crash in 2011.

Believe me; all that it takes is a little bit of effort on the part of the investor. There are some key data points that investors need to track. Track the pattern of bulk deals and check if the strong hands are exiting or entering. Promoters buying and selling has to be reported as per SEBI requirements. Also, check the ownership shifts on a monthly basis. It clearly indicates which way the wind is blowing.