Informative Transactions vs. Uninformative Transactions 

While TipRanks consolidates thousands of insider trading activities daily, we go one step further and define these trades as informative versus uninformative. The reason? Informative trades hold more significance from an investor’s trading perspective compared to uninformative trades. While Uninformative Buys and Sells can occur due to myriad reasons, the Informative Buy essentially means the insider sees a bright future for the company, or at least a bright future for his or her own trading account.    

Uninformative transactions indicate that an Insider is buying/selling shares for reasons that do not necessarily indicate confidence in the company. Therefore, they do not hold much significance. For example, an Uninformative Buy in insider trading can be a trade made by an insider who is given shares as a form of compensation. Likewise, Uninformative Sells are often made by Insiders who are exercising options that are about to expire, or cashing in shares that are given to them as a form of payment. 

On the other hand, Informative Buy/Sell transactions are deliberately made by Insiders, thus indicating a vote of confidence in the company. The Informative Buy transaction particularly stands out as a Buy signal for anyone watching. An Informative Buy trade is an instance wherein an insider decides to make a purchase of company shares with his or her own capital. These are significant, as they show an assertion of confidence in the company and its future by the insider and indicate that the stock may gain in price thereafter.