The U.S. Securities and Exchange Commission (S.E.C.) acts as the market’s watchdog.
To keep the stock market safe and honest, the S.E.C. requires that companies, insiders, and other financial institutions to be transparent and disclose their corporate actions.
For example, when a hot-shot hedge fund takes a large enough stake in a company, they have to disclose it and make the information readily available to the public.
Most people don’t know where to find this information. And the ones that do are often too lazy to go through the thousands of documents to find that one needle in a haystack.
(Sure these filings are free to the public but unless you are an attorney or a forensic accountant good luck trying to make sense out of them. I’ve got a better solution.)
For example, just the other day Perceptive Advisors (a top performing hedge fund) disclosed that it bought 1 million shares of this tiny stock that goes by the company name of VBI Vaccines at around $0.62.
Naturally, a smart money buy like that would cause almost any small-cap stock to pop… and it did.
(I do all the hard work for you, and for a limited time, you can receive my FDA Insider Alerts at an 80% discount, along with a special bonus. Join Now)
You better believe I was in VBIV… and you better believe I was ringing the register.
However, I was in a week earlier, well before Perspective Advisors disclosed its stake.
What did I see before them? And what’s the takeaway from this trade… so you’re able to pad your wallet next time it comes around (and they come around often)?
Keep reading below if you want to learn more.
If you don’t know… one of my favorite things to do when finding stocks to trade is to follow the paper trail.
What I mean by that is looking for clues as to what the smart money is thinking.
You might be thinking, Kyle… wouldn’t I need a lot of technology to find all this data?
No… it’s actually all public and provided by SEC Edgar.
The forms that we’re most interested in are ownership forms. More specifically, I’m talking about the Form 4, SC 13G or SC 13D filings… but right now, we’re just focused on the Form 4.
Form 4 Filing Explained
Now, the SEC Form 4 filing is simply a statement of changes in beneficial ownership. Basically, corporate insiders (directors, officers, shareholders owning at least 10% of the company’s outstanding shares) must disclose when they buy or sell stocks.
You see, insiders are privy to information about a company that we’re not… so if you think about it… if insiders are buying shares, that could be a sign that they “know something” that could send the stock higher… or just simply have confidence in the company over the long term.
When insiders are buying shares of a stock… chances are it’ll run up after the filing.
On the other hand, what do you think would happen to a stock if insiders are selling shares?
Chances are it’ll go down.
Remember, I don’t just look at insider transactions… I’ll also analyze catalyst events, charts, earnings, and a whole lot more before I enter a trade.
Now, I actually used a catalyst event and a Form 4 filing to lock in an $8K winner in just a few hours.
Insider Transactions Case Study
Check out the daily chart in VBI Vaccines (VBIV).
This stock was beaten down on Monday, after it announced data from its Phase 3 study of its hepatitis B virus vaccine.
Now, the company met its primary endpoints, which was positive. However, VBI Vaccines did not meet its secondary endpoint.
According to principal investigator Timo Vesikari, ““These results are truly exciting and demonstrate, in a large multicenter controlled trial, the impressive efficacy of Sci-B-Vac at a dose half that of other hepatitis B vaccines.”
That said these results were mixed… and the market didn’t take it too lightly… dropping over 60%.
After this big drop… VBIV actually got some positive news.
I actually saw a top-performing biotech fund (Perceptive Advisors) buy more shares of VBIV, as shown in the Form 4 filing below.
Perceptive Advisors bought 1M shares at $0.618 and currently owns nearly 25M shares in VBIV.
Now, if you look back to the chart above, you’ll notice that VBIC was holding right above $0.60… and there’s an upcoming catalyst in 4Q 2019.
VBI Vaccines noted it expects to release top-line results from its study, and if the study is successful… it would file regulatory applications in Europe, Canada, and the U.S. in mid-2020.
With these catalysts on the table… it actually caused the stock to bounce.
Once I saw the Form 4 filing… I bought shares and let clients know about my moves in VBIV.
(Think following insider transactions can boost your trading performance? Click here to get alerted on trades like these)
Just over an hour later… I actually took profits ahead of my target.
You might be wondering, Kyle shouldn’t you stick to your plan?
Well, yes… most of the times you should.
However, look at this price action on VBIV yesterday on the 5-minute chart.
You can see VBIV actually try to break above 75 cents… only to pull back… so I sold my shares at 74 cents for around an $8K win!
It looks like I made the right move cause the stock pulled all the way back to $0.67.
￼As you can see, the Form 4 filing is a great tool to have… and you can always search for insider transactions. Now, if you’re having trouble finding out when insiders are buying and selling shares… knowing which hedge funds can move stocks… and spotting trades like VBIV, then click here to get started.