Saturday, May 9, 2009

Big Time Insider Buy on This Stock

As I've said over the past couple of weeks, I like to track the trends of insider buys/sells. The trend has been that the insiders have been selling at a higher than average margin. There are a few opinions as to why this is happening, and they are likely one of the following:

1) They have been waiting to sell shares but didn't want to sell at previous depressed levels

2) They don't have a ton of confidence in this recent rally and want to get out of their shares

3) They anticipate higher tax rates on the horizon (Got this from Todd Sullivan at Value Plays).

When I read, I take a look at the insider buying and selling. Today I saw a pretty good sized buy that caught my eye.

Advanced Battery Technologies (ABAT) CEO Zhiguo Fu bought 1,000,000 shares this week at $2.65/share. Advanced Battery is announcing quarterly earnings after the market close on Monday. That's quite interesting. Investors also found it interesting this week as the stock rallied up to $3.73 on Friday.

To me this is a sign they might surprise to the upside on Monday. It could mean nothing at all, but a buy that large that close to earnings seems like a sign. If he was trying to cushion the blow of bad earnings and present a positive image, he'd be buying after a negative report came out. But he's buying pre-earnings. I'm going to watch this stock closely on Monday. Typically I lighten up on a stock pre-earnings due to the risk involved, but this may be one of those times you could look to take a chance.

The overall insider buying/selling has returned to a high bearish ratio. Lots more selling this week.

No Position in Stock Mentioned.