WEALTHTRACK Buying by Corporate Insiders Can Mean Excess Returns for a Stock
Aug 22, 2025
John Spears, Managing Director at Tweedy, Browne, shares insights into their new ETF focused on undervalued companies linked to insider buying. He explains how insider purchases serve as indicators of future excess returns, supported by empirical research. The discussion includes the ETF’s practical implementation, highlighting a unique scoring approach and investment strategies. Spears also addresses the current market landscape, suggesting that investors consider international opportunities for better value, following Benjamin Graham’s timeless wisdom.
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Insider Buying Predicts Excess Returns
- Empirical studies show insider buying combined with low valuation predicts large excess returns.
- Tweedy, Browne's research replicated this globally and found >10 percentage point outperformance historically.
Use ETFs For Tax Efficiency
- Use an ETF wrapper to capture insider-buying value strategies in a tax-efficient way.
- ETFs can often avoid realizing capital gains and boost after-tax returns for investors.
Confirm Insiders Buy Voluntarily
- Verify insider purchases are voluntary, not required by compensation rules, before trusting the signal.
- Exclude 'non-free will' buys that stem from mandated ownership requirements.
