The Microcap Minute Classroom. Module 7, chapter 4: Insiders buying their own stock <div class="learn" markdown="1"> **What you will learn** - Who an "insider" is and what Form 4 reports - Why open-market buying and selling are not mirror images - The three transaction codes worth memorising - The Indian cousin of this idea: promoter disclosures </div> In India you have heard of promoter buying: when the family that runs a company buys more of its own shares, people sit up and notice. In America the closest thing is a form called the **Form 4**. An **insider** (a company's top officers, its directors, and anyone owning more than 10%) must report every trade they make in their own company's stock within **two business days**. Two days, not 45. This is the fastest filing you will meet. Why do people care? Think of a restaurant. The menu can say anything, but if the chef happily eats his own cooking every day, that tells you something the menu cannot. Insiders know their company better than anyone outside it, so their own money is worth watching. ## Buying and selling are not mirror images People sell shares for a hundred ordinary reasons: a house, college fees, spreading their risk. A sale is a weak signal. But an **open-market purchase** (buying shares on the stock exchange with your own money, the way you would) usually has just one reason: the buyer believes the price is good. Now the honest limits. Insiders can be wrong, and they often are. Some buys are small and just for show. And not every "buy" is a buy at all: companies hand shares to their bosses as pay, which is compensation, not conviction. One small purchase proves little. A **cluster** (several insiders buying around the same time) is far more interesting. ## A worked example: reading the codes Every Form 4 has a transaction table with a code column. Three codes cover most of what you will see: **P** is an open-market purchase, **S** is a sale, and **A** is a grant, shares received as pay. Look at Apple's Form 4s and you mostly see S and A: executives receive stock as pay and sell some of it. That is normal life, not bad news. A genuine P from a top boss is rare, and worth a second look. Our tracker's [promoter-buying page](https://themicrocapinvestor.github.io/smart-investor-tracker/promoter-buying.html), named with the Indian word you know, collects these open-market insider purchases from US filings so you can scan them in one place. On a real Form 4, the code column is what separates a genuine purchase (P) from shares handed over as pay (A). <div class="try" markdown="1"> **Try it yourself** Open the promoter-buying page and pick one insider purchase. Then find the matching Form 4 on EDGAR (search the company name, form type 4). Confirm the code really is P, and note the price paid and the total money spent. Ask yourself one question: is this amount big for this person, or pocket change? Size is what separates a signal from a show. </div> <div class="takeaways" markdown="1"> **Key takeaways** - Insiders must report trades in their own company's stock on Form 4 within two business days. - Open-market buys (code P) are the interesting signal; grants (code A) are just pay. - Selling has many innocent reasons, so a sale is a weak signal. - Even a real insider buy is not a guarantee. Look for clusters and meaningful size. </div> **Read one real thing:** [Apple's Form 4 filings on EDGAR](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000320193&type=4). Open any one and find the transaction code column before you read anything else.. I am Ritu, a synthetic voice, and the words I am reading are Ayush Agrawal's.

# Insiders buying their own stock <div class="learn" markdown="1"> **What you will learn** - Who an "insider" is and what Form 4 reports - Why open-market buying and selling are not mirror images - The three transaction codes worth memorising - The Indian cousin of this idea: promoter disclosures </div> In India you have heard of promoter buying: when the family that runs a company buys more of its own shares, people sit up and notice. In America the closest thing is a form called the **Form 4**. An **insider** (a company's top officers, its directors, and anyone owning more than 10%) must report every trade they make in their own company's stock within **two business days**. Two days, not 45. This is the fastest filing you will meet. Why do people care? Think of a restaurant. The menu can say anything, but if the chef happily eats his own cooking every day, that tells you something the menu cannot. Insiders know their company better than anyone outside it, so their own money is worth watching. ## Buying and selling are not mirror images People sell shares for a hundred ordinary reasons: a house, college fees, spreading their risk. A sale is a weak signal. But an **open-market purchase** (buying shares on the stock exchange with your own money, the way you would) usually has just one reason: the buyer believes the price is good. Now the honest limits. Insiders can be wrong, and they often are. Some buys are small and just for show. And not every "buy" is a buy at all: companies hand shares to their bosses as pay, which is compensation, not conviction. One small purchase proves little. A **cluster** (several insiders buying around the same time) is far more interesting. ## A worked example: reading the codes Every Form 4 has a transaction table with a code column. Three codes cover most of what you will see: **P** is an open-market purchase, **S** is a sale, and **A** is a grant, shares received as pay. Look at Apple's Form 4s and you mostly see S and A: executives receive stock as pay and sell some of it. That is normal life, not bad news. A genuine P from a top boss is rare, and worth a second look. Our tracker's [promoter-buying page](https://themicrocapinvestor.github.io/smart-investor-tracker/promoter-buying.html), named with the Indian word you know, collects these open-market insider purchases from US filings so you can scan them in one place. On a real Form 4, the code column is what separates a genuine purchase (P) from shares handed over as pay (A). <div class="try" markdown="1"> **Try it yourself** Open the promoter-buying page and pick one insider purchase. Then find the matching Form 4 on EDGAR (search the company name, form type 4). Confirm the code really is P, and note the price paid and the total money spent. Ask yourself one question: is this amount big for this person, or pocket change? Size is what separates a signal from a show. </div> <div class="takeaways" markdown="1"> **Key takeaways** - Insiders must report trades in their own company's stock on Form 4 within two business days. - Open-market buys (code P) are the interesting signal; grants (code A) are just pay. - Selling has many innocent reasons, so a sale is a weak signal. - Even a real insider buy is not a guarantee. Look for clusters and meaningful size. </div> **Read one real thing:** [Apple's Form 4 filings on EDGAR](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000320193&type=4). Open any one and find the transaction code column before you read anything else.

That was chapter 4 of module 7. The text, the pictures and the exercise are on the lesson page. Thank you for listening.