Every investor knows that the path toward profits lies in buying low and selling high. That’s a basic precept of any economic trading system. The trick, however, is recognizing when the stock is low enough to buy in. The prime moment to buy is when the stock hits bottom; that will maximize returns when the share price starts to rise again.
There are a multitude of possible clues investors can use to find the price bottom; today, we’ll be looking at insider buying trends.
Insiders – the corporate officers, board members, and others ‘in the know’ – don’t just manage the companies, they know the details. Legally, they are not supposed to trade that knowledge, or to blatantly trade on it, and disclosure rules by government regulators help to keep the insiders honest. Their honest stock transactions, however, can be highly informative. These are the people with the deepest knowledge of particular stocks. So, when they buy or sell, especially in bulk, take note.
As George Muzea, a former market advisor to George Soros, recently commented, after a career studying and investing in insider trades, “Insiders are basically value investors. They buy into price weakness…”
So let’s put this into practice. We’ve used the Insiders’ Hot Stocks tool at TipRanks to find stocks with recent ‘informative’ insider buys – and we’ve further sorted those to find three whose share price is beaten down. Let’s take a closer look.
Mersana Therapeutics (MRSN)
We’ll start with Mersana Therapeutics, a clinical stage biopharma company focused on the development of antibody drug conjugates (ADCs) for the treatment of various cancers. These proprietary drug candidates take a highly targeted approach to defeating tumor growth, combining monoclonal antibodies with existing anti-cancer drugs. The result is a cancer drug that attacks specific antigens on tumor cell surfaces. One supposed advantage is a greater tolerability for patients.
However, in September of last year Mersana reported the second patient death in its ongoing Phase 1 clinical trial of upifitamab…