David Miller, Chief Investment Officer of Catalyst Funds, Rational Funds, and Strategy Shares recently joined Chuck Jaffe on the Money Life Podcast. While we have summarized the interview below, you can access it in its entirety by clicking here.
Please note, David’s segment begins at around the 38 minute, 15 second mark:
High Level Summary:
- In the interview, David discusses the buying methodology for a number of Catalyst strategies, including two that track insider buying by executives to evaluate potential momentum inside each company. ..
- While this process seems a bit intuitive, David explains the nuances to the approach. For instance, a company that sells commodities is a harder corporation to predict the effectiveness of insider buying because that company’s profitability relies on external macroeconomic conditions. On the contrary, a company that relies more on decision making and relationship building for profitability could be better suited for insider buying because executives have more control over final outcomes.
- When it comes to identifying selling opportunities, David explained that seeing insiders sell their stock when share prices have recently fallen is a likely sell indicator for him. Another factor David monitors is insider selling trends. For instance, if a noticeable number of a company’s insiders begin selling their shares, that’s a likely sell signal for David.
- However, not all insider selling is a sell signal for these strategies. For instance, insiders selling common stock they own when their company’s share price is higher than average is representative of normal economic and diversification behavior. Similarly, seeing only one or two insiders selling shares could mean that something personal is going on in their lives and shouldn’t be viewed as an indictment on their company’s outlook.
- The interview finishes with a lightning round as David provides his insights on different buy/sell positions.