The Rules of Insider Trading


Everybody listens to. BILLTOWN. Daniel town. Up to the PODCAST. We are here to teach and learn about. Investing. Mostly. Ler. Mostly. Teach. Although I have to say. I always seen in my life that you learn I learned the most when I teach something. You certainly, I've learned on this podcast that you certainly learn. where the holes are where you've sort of. Lightly. You know treated lightly intellectually that you've sort of breezed through some major point and you've been amazing it kind of poking. The holes out and saying here. And I. Don't understand this and this doesn't make sense and so on. So that I've learned a lot actually on this podcast. About how to teach it maybe. That's Nice I wasn't trying to poke holes. I was just trying to understand what's the best the best rationale for poking holes trying to understand. So we're wrapping up something here. What are we wrapping up? The management of the business were understanding the management of the business? As one of our major checklist items and we've covered. The fact that management is is good if the company has little or no debt Rico, his high again smaller R. E is high nuggets smaller. It's got low maintenance capital expenditures. Free cash flow is a big chunk of earnings. Owner earnings is a big chunk of earnings. CEO's experienced. Got A great track record. Believe they have integrity pay is reasonable based on long-term success so they're on the same side of the table is us which we talked. About. Is. Somewhat. problematic. Super Interesting. Last thing is that management is buying their stock. which is wait a second. Okay. I write each one down. And I make a little check box because it's a checklist. Say it again. The whole thing? No. Just in the newest one Lewis one the last one. Number management is buying their stock. Is. Buying their staw. That means insider trading. We'll show that the management team is reporting that they're buying their own stock out in the market and pain real money. Okay so you set a couple of things there. One is they're buying it off. The market rate public market. So. What you're talking about there is that when somebody who's an insider like an executive is they have to report to the SEC in the US is how it works. They have to report to the SEC that they have bought the stock of their company and the se then puts it out publicly so that we all know what's going on and if they sell, they have to do the same thing. So we just know kind of like what's happening Rather, quickly to forty eight S. yeah. And they have to tell us what price they paid for it. How many shares they bought? True. It's quite. Quite comprehensive and we get to see. that. All important information why is that important? because. They only buy their stock for one reason. and. That's because it's GONNA go up. There's a lot of reasons why somebody might sell a stock who's in a management position But if it's a significant purchase, we'll talk about that in a second. There's only one reason that management make significant purchases of their own stock at market prices through the public market, and that is because that is going up in their opinion doesn't mean they're right. All the time, but it is a heck of a great signal. That something good is in the works you may not see in the numbers. But these guys are the on the very inside and it's not illegal for them to do that. That's. Think. Really astonishes some people. because. Obviously, management knows things that have not been disclosed to the to the. Public. And yet they can buy their own stock based on that inside information. When if they told me if if somebody from Armada Hoffler for example, which is like a family owned company largely public company, but our family owns a big chunk of it. If. If someone on the inside of that company told me something. About the company that had not been released to the public and I went and bought the stock. I go to jail. Go to jail. That's what they got. Martha. What's her name? Martha Stewart Mother Stewart. Martha. Stewart. They didn't actually get it for inside trading I. Think they could. They got her for lying about it. Yeah, and she went and did jail time. So this is a really interesting loophole in the law for insider trading, and that is a management team absolutely combined their own stock without disclosing this new information to the public. As long as they. File with the SEC within forty eight hours that they bought the stock. So this is important information because it's kind of the equivalent. Of going public with some new information.

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