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How a Wave of Insider Buys Could Lead to the Next Big Sector Rally

You’ve heard me talk a lot recently about the strength in the biotechnology sector and why I’m looking for it to potentially lead the next bull rally.

One reason for that is the price action I’m seeing in the overall sector…

The SPDR S&P Biotech ETF (XBI), an exchange-traded fund tracking the biotech sector, is up over 30% from its recent low.

On the other hand, the S&P 500 Index is just 4% above its recent low, which shows just how strong biotechs are in comparison.

But the other big factor that is giving me a lot of confidence in the biotech sector in particular as well as the health care sector in general is what I’m seeing in terms of insider buying…

Insiders Know the Way

When you really want to get to know a company behind a stock, there really is no one better to provide the lay of the land than the folks that run that company.

These folks are referred to as company insiders, and they know everything about their companies. 

They know what’s being sold now in their products and services, and they know what’s likely to be sold for the next quarters. 

They also know what’s coming up for new products and services for even greater revenue, they know the cost side of their companies and they know how their company stands on credit. 

All of this points to the obvious… 

That company insiders using their own cash to buy shares in their own companies is one of the best indicators of a potential bullish move to come.

Be the Guru

This is exactly why I focus on insider buys in my premium Insider Effect research service.

And one of the ways I track corporate insider activity is by using a research service provided by GuruFocus.com.

This website provides a snapshot of the insider buy/sell ratios for each major sector of the market.

And that gives us clues as to where corporate insiders are putting their money to work and whether they feel confident about their companies’ prospects.

Take the energy sector, for example…

Insider Buy/Sell Ratio for Energy Select Sector SPDR Fund (XLE) – Source: GuruFocus.com

In the chart above, you can see the 10-year performance of the Energy Select Sector SPDR Fund (XLE) in blue along with the ratio of insider buys to insider sells in green.

The first thing you’ll likely notice is the big spike during the 2020 crash when oil prices went negative and most energy stocks plunged.

Insiders clearly knew that was a great buying opportunity, so we saw them buying in far greater numbers than they were selling.

Fast-forward to today, and while there are still insider buys happening, we’re not seeing them in the kind of numbers that we did in 2020.

Healthy Buys

Now, let’s take a look at the health care sector, which is tracked here by the iShares U.S. Healthcare ETF (IYH)…

Insider Buy/Sell Ratio for iShares U.S. Healthcare ETF (IYH) – Source: GuruFocus.com

Again, you’ll likely notice the big spike during the pandemic panic when the market fell apart.

Insiders recognized that this was a buying opportunity, and they put their money to work at great, low prices.

Well, today, we are seeing something similar, although the insider buy/sell ratio for May was actually even higher than the spike we saw in March 2020!

This tells me that the folks who know the most about their companies are eager to get their hands on as many shares as they can while prices are dipping.

CEO & CFO Buy/Sell Ratio for iShares U.S. Healthcare ETF (IYH) – Source: GuruFocus.com

Now, GuruFocus also breaks these numbers down so that we can see the CEO and CFO buy/sell ratio of each particular sector fund.

Once more, we are seeing big spikes in recent months that are either near or above where they were in 2020.

That’s a big vote of confidence from these leaders and one of the main reasons why I’ve been looking for bullish ideas in the health care and biotech space.

Join the Insiders

Now, this is really just the start of the analysis I do for every trade in my premium Insider Effect research service.

After doing this high-level overview, I dig in further and sift through SEC filings to see which specific stocks are getting the most insider buying attention.

When I see buy after buy after buy from in-the-know insiders like board members and C-level executives, I know I’m on the right track.

Now, if you want to get the inside scoop on trading like the insiders, please join me today at noon for a very special Insider Effect session today at 12 p.m. ET, which is absolutely free to attend!

I’ll cover my strategy for trading alongside corporate insiders and generating potentially massive gains with minimal risk.

Just click here to register and reserve your seat for this special Insider Effect presentation TODAY at 12:00 p.m. EST!

I look forward to seeing you there!

Embrace the surge,

Ross Givens
Editor, Stock Surge Daily

Ross Givens
Ross Givens

I bought my first stock when I was 12 years old. It was Microsoft. I’ve been a registered financial advisor. I’ve worked as a stock broker. I ran a managed fund. I was a Vice President at JP Morgan with Series 7, Series 66 and Series 3 securities licenses. I’ve been featured on Fox Business, CNBC, Bloomberg, and a bunch of other networks. The only thing I enjoy more than making money, is helping YOU make money.

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