E Exploring The Regular Insider Buying At Biostage Inc.

Warren Buffett’s (BRK-A) first rule about investing is “don’t lose money”. His second rule is “don’t forget rule #1”.

Based on Buffett’s track record, I’m willing to take his advice.

The complication I have is that I’m not as smart as Warren Buffett. Not even close. That makes it harder for me to avoid companies that could put me offside rules number one and two.

To help me avoid making critical mistakes I decided to add a layer of defense to my investing process. That layer of defense is focusing exclusively on companies that are either being bought by proven world class investors (like Buffett) or by company insiders.

The way I figure it, insiders know the company they work for better than anyone and the world’s greatest investors make fewer investing mistakes than most of us. By limiting what I focus on to companies that have made it through this filter I believe I’m exposing myself to a less risky sample.

Plus companies with insider buying and those that are being bought by the world’s top investors are likely to not just be less risky but also have significant upside as well.  By doing this I believe I’m high-grading my selection pool.

Biostage Inc (BSTG) – Regular Insider Buying

Image source: yahoo finance

As you can see from the stock chart above, Biostage’s share price experienced a decline back in May of this year.  Since then insider buying has been pretty steady and it has come from a variety of different insiders.

Source: Yahoo finance

All of this insider buying has taken place at share prices higher than where the stock currently trades.

Biostage is a small company.  I take insider buying at smaller companies much more seriously than I would if it occurred at a large cap.  At a large cap the executives and directors tend to be multi-millionaires who can drop a couple of hundred thousand dollars just for show.

At a smaller company the insiders who are buying are much likely to be doing so because they are trying to make some money.  These people are like the rest of us and don’t make ten million dollars a year.

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Disclosure: I don’t own any shares of companies mentioned in this article

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Intelligntinvestor 3 years ago Member's comment

Totally agreed with what you wrote. It hasn’t been long since I started to consider insider buying in my stock analysis. Like you wrote, insider buying can be a strong indicator of where the company is heading. The organization insiders wouldn’t buy the stocks for nothing. They know that something is cooking inside the house.

Most of the time insider buying is done because they know that they are getting the stocks at fair value and their value will be maximized in the future. For us, as a public investor, it's really useful information about the company. There might be plenty of reasons behind insider selling but one and only motive of insider buying is to- make money. And our motive too, is to make money.

So, following the moves of corporate insiders can be rewarding. It’s always worth it to dig the stats of insider buying of any publicly traded companies.

David M. Green 3 years ago Member's comment

I couldn't agree more.