InterDigital Inc (IDCC)

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Repost:Insider Selling A Red Herring NOT Red Flag!

Investors Hub - InterDigital Communications  (IDCC)Post #31061
http://investorshub.com/boards/read_msg.asp?message_id=1076359
Repost:Insider Selling as Red Herring NOT Red Flag!

Investors Hub - InterDigital Communications (IDCC)Post #29254
http://investorshub.com/boards/read_msg.asp?message_id=1054186

Dannydetail/zitboy:THANK YOU! Insider Sales A Red Herring IMHO NOT a Red Flag

IMHO Insider selling is one of the most overblown and misunderstood indicator in the market. YES it CAN be significant but more often than not it has little or nothing to do with how business is going. Or at least less to do with business than many other reasons.

INSIDER BUYING on the other hand, can only mean one thing, you are absolutely right on!

Here's an article FYI:
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Fool.com: Is Insider Selling a Red Flag? [Fool's School Daily Tip] March 4, 2002
http://www.fool.com/Server/FoolPrint.asp?File=/foolu/askfoolu/2002/askfoolu020304.htm

Is Insider Selling a Red Flag?
Not necessarily

By Selena Maranjian (TMF Selena)
March 4, 2002

Q. Shouldn't I be worried about insider selling at a company in which I own shares?

A. Not necessarily. Imagine that you're a shareholder in Carrier Pigeon Communications (ticker: SQAWK) and the CEO, Frederick Shmedrick, has filed to sell 20,000 of his shares of company stock. This is insider selling. Does it mean that Carrier Pigeon is in trouble? Does Fred know something the rest of us don't know? Should we all sell our shares of SQAWK?

Many investors might worry about this, thinking that it's a bad sign. But the truth is that insider selling isn't necessarily something to fret about. Let's think about why Fred might be selling.

Maybe he really does think the company is in trouble. Or maybe he believes another investment holds better promise. Or possibly he just needs the money -- to buy a house, to pay for his son Oswald's college education, or to bid at Sotheby's for Theodore Roosevelt's gilded ashtray.

Another reason many executives sell their shares is that stock options are the major component of their compensation package. This is particularly true at upstart technology companies. Some of these managers have worked for the company for a long time and have been fed stock options by the board of directors instead of big salaries. In many cases, they have most of their wealth tied up in stock, without much moolah lying around. For them, cashing in some options is a fairly routine thing to do.

Executives sell for a variety of reasons. If you see an insider selling shares, it doesn't necessarily mean the company is in trouble. (Of course, if you see droves of insiders selling, that's a bit more worrisome.) There's always a chance that the insider does know some bad news, but it's just as likely that he simply needed some cash. You should definitely take a look at how many shares he is selling relative to his total ownership position. Insider-sale reports should include that statistic -- and, if they don't, consider calling the company and asking for that information.

Insider buying is a much better sign. After all, managers don't buy shares of stock unless they're believers. But the next time someone shouts that insiders are selling a stock you own, don't jump ship without doing a little research.

You can look up insider trading information at MSN Money.
http://moneycentral.msn.com/investor/invsub/insider/trans.asp

This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out -- it's a handy resource.