Informative Buy
An informative buy is an insider purchase that significantly increases the executive's total position in the company, typically by more than 10%. These purchases signal strong conviction because the insider is putting more of their own capital at risk.
The Trader's Take
The Signal
Informative buys are among the most reliable bullish signals. When an executive increases their position size substantially, it demonstrates they believe the stock will appreciate significantly.
The Noise
Small purchases that don't meaningfully change position size are less informative, as they may be routine portfolio management.
Actionable Insights
- 1Calculate the percentage increase in the insider's total position after the purchase.
- 2Purchases that increase position by >25% are highly informative.
- 3Compare the purchase to the insider's total net worth exposure to the company.
- 4Look for informative buys from CEOs and CFOs—they have the best information.
Regulatory Context & Context
Common Misconceptions
A $1M purchase isn't automatically informative—it depends on the insider's existing position size.
Informative buys can occur at any price level, not just when the stock is "cheap."
Frequently Asked Questions
What percentage increase makes a buy "informative"?
Generally, purchases that increase an insider's total position by more than 10-15% are considered informative, though context matters.
Are informative buys from CEOs more significant?
Yes, CEOs typically have the best information about company prospects, making their informative buys particularly noteworthy.