How To Practice Insider Trading in PSE – Legally!
Ok, I admit, it’s not about insider trading.
But there is a way you can leverage what insiders know, without having to resort to insider trading.
Although there are plenty of other ways to make money on stocks (perhaps even safer ones, since such info can be tricky), there is something to be said about leveraging the knowledge of people in the company that are in position to really know how the business is doing.
More to the point, they can provide some perspective if the current stock price is inflated, or unnecessarily low.
And you don’t have to get close to anyone or even socialize with them.
All you have to do is go to PSE’s official website and look under disclosures. You can search by company if you’re interested in a particular stock. Or you can check this particular disclosure type: “Statement of Changes in Beneficial Ownership of Securities”.
That’s the disclosure type where the “big boys” of the company notifies the PSE (they are obliged to) that they have bought or sold shares of their company.
For instance, back in April 2013, Jaime Augusto Zobel de Ayala sold a bunch of AC shares. Of course he also acquired more through the company’s employee stock ownership plan.
But he sold more than he bought; and he was selling it around ~600+ while the new shares were worth ~250 each. On the surface it’s a simple case of buying low and selling high – nothing extraordinary. But in hindsight, he sold right near the peak. In about a month or so, the PSEi – and AC shares – were tumbling down. Interesting, eh?
Another interesting example: Rainerio Borja, a director of STI, sold a total of
1,600,000 shares for an average of ~0.98+ last April 2013 as well. And on July 17 2013, Martin Tanco, another director of STI, bought 2,500,000 shares of STI at ~0.79.
Now, just because they sold or bought doesn’t mean you have to do the same. But whatever they do with their shares is worth notice. These aren’t ordinary employees who may have just needed some extra money for tuition.
They have a relatively unique view on the business and the corresponding stock price. They may be selling or buying shares for totally irrelevant reasons, but if anyone would know whether the company was doing well, headed for lean times or greener pastures, or whether the shares are under-priced or inflated – it would be them.
Again, that doesn’t mean we rely on them or follow their lead. But if they’re buying when everyone else is selling, or if they’re happily selling bunches of their shares while everyone else is eager to buy… well, that should make us think.
In the end, we should still rely on our research of the company (hopefully supplementing our broker’s research with our own thorough research), but taking their actions into consideration can be part of that research too.
If you liked this article, please subscribe to my feed, like me on Facebook, circle me on Google+, or follow me Twitter @thePFApprentice. It’s free, you won’t miss new articles, and you’ll also get my free ebook: the Super Savings Guide.