In their recent interview with The Market, Thomas Shrager and Robert Wyckoff of Tweedy Browne explain how they combine insider buying with cheap valuations to identify opportunities. Here’s an excerpt from the interview:
Host: You have mentioned insider buying several times. How important is it in your stock selection?
Shrager: There are studies which suggest that you can outperform for two to three years if you combine cheap valuations with significant insider buying. This is sort of common sense. Why would the CEO or CFO buy shares in his company if he did not think the company will do well? Two to three years is the time frame over which they generally know the company will be doing well or not. This has been a significant signal for us to start looking at a stock.
Wyckoff: We have been using insider buying for more than 30 years. It has become even more important of late because of the high uncertainty in markets. It just provides additional comfort when looking at a security we believe to be undervalued to know material purchases have been made by very knowledgeable insiders who know more than anybody about the business.
You can read the entire interview here:
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