"Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise."
Peter Lynch1
The value of following corporate insiders has not escaped the top investors of our time, and we believe the reason is clear; CEO’s, CFO’s, Board members, and other corporate officers possess greater insight into the prospects for their company’s business than any analyst or money manager could hope to attain.
Building upon our experience tracking corporate insiders, Garden State Securities, Inc. introduces The GSS Insider Program. Utilizing an institutional research database that tracks corporate insider filings, The GSS Insider Program analyzes each open market purchase based on a number of key factors including: the buyer’s position at his/her company, dollar amount invested, percentage change in total holdings and performance on previous transactions.
The result of this process is the Admiral Insider database, offered exclusively through Garden State Securities, Inc. Admiral Insiders have demonstrated, based on their trading performance, exceptional timing when purchasing their own company stock.
Over the 3- year period ended 12/31/2010, using our proprietary quantitative process, The GSS Insider Program identified a select group of corporate executives – The Admirals – whose legal insider trading activities;
- Produced average calendar year returns significantly outperforming the benchmark Standard and Poor’s 500 index.2
- Experienced price action subsequent to their purchases with the average maximum unrealized gain 7 times greater than the average maximum unrealized loss.3
This material contained herein has been prepared by Garden State Securities, Inc.
ANALYST CERTIFICATION AND OTHER REQUIRED DISCLOSURES, INCLUDING A GLOSSARY OF TERMS, APPEAR IN THE SECTION ENTITLED "ANALYST CERTIFICATIONS, GLOSSARY OF TERMS AND REQUIRED DISCLOSURES".
The materials contained herein are intended to provide information regarding a trading strategy. The analyst preparing this material, registered representatives and other employees of Garden State Securities may benefit from any investment by you in the securities referred to in this material and under the trading strategy. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this material as only a single factor in making their investment decision. The figures contained in performance charts refer to past performance; past performance is not a reliable indicator of future results.
1Source: Peter Lynch with John Rothchild, One Up on Wall Street (USA: Penguin Books 1990)
2The “Average Calendar Year Return” is calculated by taking the “Insider Purchase Price” for each transaction and comparing it to the subject company’s “Calendar Year-End Closing Price” on December 31st of that same year. We then divide this difference by the “Insider Purchase Price” to determine the “Insider Purchase Price Percentage Return.” The sum of the “Insider Purchase Price Percentage Return” figures is then divided by the number of insider transactions to determine the “Average Calendar Year Return.” Lastly, we compare the “Average Calendar Year Return” for each year to the respective annual return of the S&P 500.
The following is a summary of the annual advance/decline statistics for the Admiral Insider purchases that we identified for the 3-year period ending 12/31/2010:
2008 - 17 Admiral Insider purchases, 10 advanced and 7 declined as of 12/31/08
2009 – 34 Admiral Insider purchases, 32 advanced and 2 declined as of 12/31/09
2010 – 51 Admiral Insider purchases, 46 advanced and 5 declined as of 12/31/10
A complete record of the Admiral Insider purchase data is available upon request.
Click the link entitled “Analyst Certifications, Glossary of Terms, and Other Required Disclosures” for the related glossary of terms.
3We reviewed market prices for each stock between the “Insider Purchase Date” and its respective calendar year-end. We compared the “Intra-day High Price” from this period to the “Insider Purchase Price” to determine the maximum unrealized gain percentage. We compared the “Intra-day Low Price” from this same period to the “Insider Purchase Price” to determine the maximum unrealized loss percentage. We added the maximum unrealized gain percentages and divided by the total number of purchases, i.e. 102, to calculate the “Average Maximum Unrealized Gain” (100.30%). We performed the same calculation using the maximum unrealized low percentages to compute the “Average Maximum Unrealized Low” (12.93%). The ratio of gains to losses is 7.76.
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