📖Peter Lynch

Insider Buying

🌿 Intermediate★★★★☆

When company executives spend their own money buying shares, they are voting with their wallets.

💬

When insiders are buying, it's a good sign.

— *One Up On Wall Street*，1989

🏠 Everyday Analogy

Just as a restaurant owner dining in their own establishment, if even the owner is unwilling to eat the food, would you dare to enter? When company executives use their own capital to purchase shares, it demonstrates their strong confidence in the company's future—a far more compelling statement than any verbal commitment.

📖 Core Interpretation

When management and directors purchase shares with their own money, it sends a strong bullish signal.
💎 Key Insight：Insider buying is one of Lynch's favorite signals because it removes ambiguity about management's outlook. An executive who buys $500,000 worth of shares with personal money has skin in the game. The signal is strongest when multiple insiders buy at similar times, when purchases are large relative to their compensation, and when the stock is near lows. Track insider filings consistently.

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❓ Why It Matters

They know the company best, and their willingness to bet their own money demonstrates strong confidence.

🎯 How to Practice

Pay attention to the purchase records of executives and directors, particularly large-volume purchases.

🎙️ Master's Voice

If you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall.
Lynch found The Limited, Gap, and Dunkin Donuts by shopping and observing. Great investments were hiding in plain sight.

⚔️ Practical Guide

✅ Decision Checklist

  • What great businesses do I see daily?
  • Am I observing my environment?
  • Am I alert to opportunities?

📋 Action Steps

  1. Observe businesses in daily life
  2. Note which stores are thriving
  3. Research companies you encounter

🚨 Warning Signs

  • Ignoring daily observations
  • Only researching abstractly
  • Missing obvious opportunities

⚠️ Common Pitfalls

✕Small purchases may be symbolic in nature.
✕Focus on the purchase amount and timing.

📚 Case Studies

1
General Public Utilities Post-Three Mile Island (1982)
After the 1979 nuclear accident, GPU’s stock collapsed. Lynch noticed significant insider buying by executives who believed cleanup progress and regulatory clarity would stabilize the business.
✨ Outcome：Fidelity’s Magellan fund invested, and as fears eased and earnings recovered, the stock price rebounded strongly over the next few years.
2
Fannie Mae Turnaround Bet (1984)
Following severe losses and dividend cuts, Fannie Mae traded at depressed valuations. Lynch saw large insider purchases signaling confidence in restructuring, improved underwriting, and interest-rate stabilization.
✨ Outcome：Lynch bought heavily; Fannie Mae became one of Magellan’s big winners as profits surged and the stock multiplied several times in the late 1980s.

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