This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Top Insider Purchases: Legal and Extremely Profitable

NEW YORK ( Insider Monkey ) -- The insider trading arrests yesterday show how inside information can be funneled to hedge funds. The process makes hedge fund clients rich at the expense of unsophisticated ordinary investors.

Illegal insider trading is definitely profitable but relatively risky. It's possible to eliminate the risk but still profit from insider trading. Academic studies have shown this to hold true for the past 50 years and across the globe. Insider purchases beat index funds by more than 7 % per year when there are several insiders purchasing.

Two weeks ago we published the list of companies with at least three insiders buying. Six of the seven companies beat the index funds during the following week. Last week we published 6 more companies with insider purchases. Here is how those six stocks performed:

1. Scientific Games Corp (SGMS): Scientific Games Corp went up by 2.6% between last Thursday's close and this Thursdayâ¿¿s close. S&P 500 ETF (SPY) went up by 0.86% during the same time period.

2. Black Hills Corp (BKH): We mentioned that we didn't like to pay a 3% premium for this electric utilities company. The stock went down by 0.3%, underperforming the market index by more than 1 percentage point.

3. World Heart Corp (WHRT): This is another stock that underperformed the market index. It returned 0.5% during past week. But this is a very illiquid stock and we usually stay away from it.

4. Town Sports International Holdings Inc (CLUB): We added this stock a month ago to Insider Monkey's hypothetical portfolio when it was trading at $3.01. This Thursday it closed at $3.71. The stock returned 1.9% during the past week and 23.2% during the past month.

5. Career Education Corp (CECO): Career Education Corp went up by 1.1% during the past week, beating the market.

6. Raymond James Financial Inc (RJF): We declined to imitate Raymond James insiders because the transactions didn't appear to contain any information at all. However, the stock returned more than 2.5%, beating the market.

Overall consensus criteria beat passive investing by 3-2 last week. The average return for this portfolio was 1.2% during the past week, 0.3 percentage points higher than the market return. Of course, this is just a very small sample and does not prove or disprove the credibility of monkeying insider purchases.

Insider Monkey, your source for free insider trading data, will share very recent academic studies with you, so that you can do your own research. We will keep providing weekly updates on stocks insiders buy like crazy, although it might be better to follow them in real-time if one is monkeying insider transactions. Here are the four stocks insiders were buying like crazy this past week:

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,055.87 -116.81 -0.68%
S&P 500 1,982.77 -11.52 -0.58%
NASDAQ 4,508.6880 -19.0010 -0.42%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs