Following the Insiders to Massive Profits

Market correction? Not for our stocks...

Posted October 4, 2021

Dear Outsider,

It’s never been a better time to know what’s happening on the inside.

Stuffy boardrooms, financial presentations in which you feign interest, cigars that seemed like a good idea 20 minutes ago, glossy business cards, booze that burns, slimy smiles, greasy hair...

Now, some of us genuinely enjoy these business dealings.

But frankly, it isn’t much fun...

I’d much rather sit in my backyard humbly sipping a Budweiser while watching the dogs and kids running around, knowing that my retirement is secure and my family is taken care of.

That’s the simple life we long for. Many of you are probably doing that right now.

But what if there were a way to be a fly on the wall during these insider meetings? That way you could avoid the hassle of these gatherings but still get all the financial information and stock picks your heart desires.

Well, I’m here to tell you it’s not only possible, but highly profitable.

Some people call it riding the coattails of the insiders, and I’ve found it to be one of the best ways to limit risk in the market while still exposing yourself to the kinds of investments that produce outsized returns. Perhaps the greatest part of this strategy is that you can often buy shares for less than the insiders paid for them!

More on that in a minute...

First, in order to limit your downside in this market, you need to have a strategy.

Here’s what I recommend...

Limit Losses and Take Profits

With accelerating inflation, higher mortgage rates, and market volatility, it may seem difficult to remain calm.

But if you’ve set up your portfolio strategically with a trailing stop policy — I recommend a 25% trailing stop based on the previous day’s closing price — you can rest easy at night. In other words, you sell a stock if it closes 25% below its last high. This allows you to not only limit losses but also wait for the stock to recover. I also typically sell half a position when it reaches 100% to ensure my profits are safe.

Speaking of profit-taking, if you’ve been following my Monday morning trades, you’ve had a good three months, even in this market.

Now, I haven’t given you specific buy or sell instructions, but based on my calculations as of this writing, our average return for all the trades mentioned, not including options, is 12.6%. If you hopped on board my short recommendations for Amazon (NASDAQ: AMZN) and Coinbase (NYSE: COIN), that percentage could be much, much higher.

The speculative plays of the bunch included NextGen Acquisition Corp. (NASDAQ: NGCA), Tilray (NASDAQ: TLRY), and Sundial Growers (NYSE: SNDL).

For speculative plays, you can use two strategies to limit losses. First, you can ignore trailing stops, buy the dip, and ride out any volatility. This comes with higher risk, however. Second — and the one I recommend — is to use a tighter 10% trailing stop to limit losses.

Using the tight trailing stop strategy, we would have stopped out of Tilray and NextGen when it transitioned to Xos, Inc., which shaved five points off the stock. Sundial rose roughly 50% in the two months following my writing and has since dropped. But using this strategy, we would have sold once the stock dropped 10% from its high, ensuring you’d have locked in some profit.

We’ve also hit notable fliers the last few weeks, including Blue Apron and Airbnb, up 80% and 15%, respectively.

Shoot me a message if you got in on any of these trades and hit a winner.

Right now, I’m looking at Alibaba (NYSE: BABA), as shares are down more than 50% year-over-year, which seems like too good of an opportunity to pass up, even with all the China mess going on. And I’m seeing a short opportunity on Facebook (NYSE: FB) because the company is unethical, sleezy, and greedy. Not to mention its user base is tanking and the platform is falling out of favor with almost all age groups (listen to “The Facebook Files” podcast series by The Wall Street Journal if you want to dig deeper).

Now, I’ve been hesitant to talk about the following project I’ve been working on, but now’s as good a time as any to share it with you. Here’s a free sneak peak of my new system that tracks insider trading...

We’re Staking Out the Insiders

Now, you can’t predict the future of the markets, but what you can do is use the information right in front of you.

All insider transactions (insiders are the CEOs, directors, and high-level executives) are made available to the public through a Form 4 filed with the Securities and Exchange Commission (SEC). You can see who’s buying, how many shares they buy, and what price they pay.

As the saying goes, insiders sell for any number of reasons, but they buy for only one reason: if they believe the stock is going up. After all, who has a better understanding of the future prospects of a company than those involved in the day-to-day operations of the business?

But I would never recommend trading based solely on insider information. That’s a surefire way to get burned. Not to mention, insiders can’t time their own stock. And I’ve found that, on average, prices trend down following insider buys.

As insider buying never tells the whole story, you need to dig deeper. That’s why I’ve developed a system to do exactly that... In fact, there’s a small window of opportunity for retail investors to get in. And once the right mix of catalysts comes together, you stand to make consistent and reliable profits while limiting risk.

The first trigger I look for is cluster buying. There needs to be three or more insiders buying around the same time at roughly the same price.

Second, I look at institutional and overall insider ownership. You don’t want to buy after the institutions have already poured in or you’ll limit your profit potential.

Third, I track volume. I’m not going to give away exactly what I look at, but once the trigger is hit, that’s when I’d issue a “buy” recommendation.

Notable Paper Trades

In the second week of July, the trigger was hit on Northeast Community Bancorp. (NASDAQ: NECB), Everything Blockchain (OTC: OBTX), and Aspen Group (NASDAQ: ASPU). By the end of the month, Northeast Community Bancorp. was down 4%, while Everything Blockchain skyrocketed 170% and Aspen rose 10%. Northeast Community has since recovered for a 1.7% gain.

In the third week of July, my system found Paycor HCM (NASDAQ: PYCR), HCW Biologics (NYSE: HCWB), and Hibbett (NASDAQ: HIBB). By the end of the month, all were in the black, with Paycor up 20%.

To close July, my system found Absci Corp. (NASDAQ: ABSI), Cytek Biosciences (NASDAQ: CTKB), and Lawson Products (NASDAQ: LAWS). In just seven days, the stocks rose 12.6%, 57.36%, and 5.8%, respectively.

In August, I paper traded Blue Foundry Bancorp. (NASDAQ: BLFY) and Oscar Health (NYSE: OSCR), which in one month rose 10.5% and 20%, respectively.

In September, my system caught Tscan Therapeutics (NASDAQ: TCRX), up 20%, and CIM Commercial Trust (NASDAQ: CMCT), up almost 30%.

To kick off October, it’s looking like Oxford Square Capital (NASDAQ: OXSQ) and Evergy (NYSE: EVRG) are getting triggered.

This is the stuff I really enjoy bringing to you, so stay tuned for more and I hope you get some much-needed value out of it.

In the Meantime

With markets so choppy lately, here are a few more ideas.

I’ve said before that owning a little bit of crypto can go a long way. The point is to risk a little bit of capital to get the most bang for your buck. And, again, word on the street is October will be the next bull market. Once that plays out, crypto will likely fall again.

Gold and gold miners are down, so now could be an excellent entry point. Check out some good deals from our mining and precious metals expert right here.

Also don’t forget that you can play options on the CBOE S&P 500 Volatility Index (VIX), which rose 25% on the day I wrote you about it two weeks ago.

And if you’ve been following the news, you know Shaquille O’Neal is denouncing his celebrity status, as he feels celebrities’ opinions shouldn’t carry any more weight than the average person’s. Check out this recent interview we did with Shaq here.

Stay free,

Alexander Boulden
Editor, Outsider Club

After Alexander’s passion for economics and investing drew him to one of the largest financial publishers in the world, where he rubbed elbows with former Chicago Board Options Exchange floor traders, Wall Street hedge fund managers, and International Monetary Fund analysts, he decided to take up the pen and guide others through this new age of investing. Check out his editor's page here.

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