Invest like an Insider

Insiders

One of the best ways to make money in the junior resource market is to follow the moves (buying and selling) made by those that have inside interest in the company that you want to buy or sell. Typically, when someone speaks of insider trading, people immediately think of it in a negative light – but it doesn’t have to be. The Canadian Securities Administrators (CSA), or Securities and Exchange Commission (SEC) in the United States, have criteria in which people who are deemed insiders can purchase or sell their own stock without the threat of reprisal.

By definition, an insider is:

“Director or senior officer of a company, as well as any person or entity that beneficially owns more than 10% of a company’s voting shares. For purposes of insider trading, the definition is expanded to include anyone who trades a company’s shares based on material non-public knowledge.”
~http://www.investopedia.com/terms/i/insider.asp (Feb.22/2016)

Walking the Talk

I have personally used insider buying as a trigger to add to my positions. My most recent example of this is November of 2014, I doubled down on True Gold Mining (TGM), as Executive Chairman Mark O’Dea made a few fairly large buys while the stock took a big hit because of the political issues in Burkina Faso. Mr. O’Dea is highly respected within the mining industry and one of the main reasons I originally invested in TGM, so when he used the political turmoil to add to his position, I thought it was a no-brainer to follow suit. Now, I will admit, there is a lot of risk associated with Africa, especially when you are investing more money into an area that is clearly under duress, but this is when a speculator truly gets the chance to hit a home run. Over the course of 2015, the stock trended lower, but so did most of the junior mining sector. Over time, however, I believe that it will be one of my best speculations.

One thing that I haven’t done is used insider selling to trigger me to reduce or sell one of my positions. What I have done, and you should feel comfortable doing this, as well, is call the company and ask to speak to the insider that sold the shares – I ask them ‘why.’ You may be surprised how accessible some of these insiders are. I was.

Getting in the KNOW

How do you find out when insiders are buying and selling? Besides knowing someone that is in the “know” within the industry, I suggest opening a FREE online account with Canadianinsider.com. I believe you can track a maximum of 25 companies (for free), and they will email you when insider trading has occurred. Also, for a fee, you can purchase full insider buying reports for whichever company you like.

One other FREE service that appears to have the same potential benefit for tracking insider buying and selling can be found at chat.ceo.ca. More information to follow on this, as I have just registered for the application and have yet to use it. Also, I do have a pending interview with the application’s creator, Tommy Humphreys, on March 5th. I hope my conversation with him will shed more light on the application’s uses and how it can benefit us, the investors.

Until next time,

Brian