Backtested insider buying as an earnings predictor for stocks that have reported so far

stockist420 · 2026-02-16T06:58:04+00:00

=== SUMMARY === - The author backtested the predictive power of insider buying on short-term earnings moves for a sample of 80 stocks that reported earnings between Jan 27 and Feb 13, 2026. - The author's thesis is that small-to-medium sized insider buys (especially from directors or VPs) are a poor predictor of positive earnings surprises and should be considered noise. Only very specific, high-conviction signals (e.g., massive buys, CEO/CFO cluster buys) have any potential value. - Quality assessment: This is well-researched, data-driven analysis. While the sample size (80 stocks, 19 with buys) is small and the timeframe is short, the author provides a clear methodology, presents the data transparently, and draws logical, nuanced conclusions supported by specific examples. === SENTIMENT === NEUTRAL === TRADE IDEAS === TICKER - DIRECTION Speaker: u/stockist420 Thesis: 1. THE FACT: The author's backtest showed that 79% of stocks with insider buying in the 3 months prior to earnings had a negative price move post-announcement. Small buys (<$1M) from directors, VPs, and board members universally failed to predict a positive move in the sample. 2. THE BRIDGE: The market often misinterprets any insider buy as a bullish signal for the upcoming earnings report. This creates an opportunity to fade, or bet against, the common interpretation, especially when the buying signal is weak (e.g., a single director buying a relatively small amount). The data suggests these buys are noise at best, and a contrarian indicator at worst for the short-term. 3. THE VERDICT: Avoid treating small, isolated insider buys as a bullish catalyst for near-term earnings events. These purchases are often for reasons other than anticipating an imminent positive surprise (e.g., optics, governance requirements) and have a high failure rate as a short-term predictor. 4. RISKS: The sample size is small and the time period is limited; this observation may not be statistically significant or hold true i

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Summary

The author backtested the predictive power of insider buying on short-term earnings moves for a sample of 80 stocks that reported earnings between Jan 27 and Feb 13, 2026.
The author's thesis is that small-to-medium sized insider buys (especially from directors or VPs) are a poor predictor of positive earnings surprises and should be considered noise. Only very specific, high-conviction signals (e.g., massive buys, CEO/CFO cluster buys) have any potential value.
Quality assessment: This is well-researched, data-driven analysis. While the sample size (80 stocks, 19 with buys) is small and the timeframe is short, the author provides a clear methodology, presents the data transparently, and draws logical, nuanced conclusions supported by specific examples.

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Did some light weight backtesting on insider buys for stocks that have reported earnings so far in last 2 weeks.

Pulled every Form 4 filing from EDGAR for the last 3 months, cross-referenced against 80 stocks that moved &gt;3% on earnings over the past 2 weeks (Jan 27 - Feb 13). Checked if insider buying before earnings predicted the direction.

| Signal | Count | Avg Earnings Move | % Correct Direction |
|:---|:---:|:---:|:---:|
| Insider bought before earnings | 19 | -11.5% | 21% |
| Insider sold before earnings | 50 | +1.4% | 50% |
| No insider activity | 22 | -12.0% | 27% |

Insider buying was **wrong 79% of the time**. Worse than having no signal at all. Insider selling was a literally a coin flip.

### The failures


These insiders bought with their own money in the 3 months before earnings. All of them got destroyed:

| Ticker | Insider Buy $ | Earnings Move | What happened |
|:---|---:|:---:|:---|
| PFSI | $200K | -33.2% | Director bought at $89, stock cratered |
| RAL | $512K | -31.8% | Three different insiders bought the week before. All wrong. |
| RBBN | $74K | -27.9% | Director bought at $2.06, still dropping |
| MOH | $100K | -25.5% | Director bought at $125. Molina missed by 739%. |
| AZTA | $190K | -22.8% | Board member bought at $27 |
| LUMN | $500K | -21.6% | VP bought 78K shares at $6.35. Beat estimates by 209% and still dropped 22%. |
| CVCO | $867K | -20.3% | CEO bought at $462-500. Most expensive wrong call in the sample. |


LUMN is the funniest one. Beat earnings by 209%, insider bought $500K the week before, stock still dropped 22%.

### The only wins

| Ticker | Insider Buy $ | Earnings Move | What happened |
|:---|---:|:---:|:---|
| UAA | $219M | +20.4% | Prem Watsa (Fairfax Financial) loaded 35M+ shares across multiple days in January |
| ENPH | $723K | +38.6% | CEO Kothandaraman bought repeatedly at $30 and $51 |
| MSTR | $3.3M | +26.1% | Multiple insiders bought. Also had $6.5M in selling. MSTR gonna MSTR. |

 The only buys that worked were either **massive** ($219M from a known value investor) or **from the CEO specifically** buying repeatedly.

Every single director buy, VP buy, and board member buy under $1M failed.


### What the data actually says

Small insider buys are noise. Directors buy $100K-$500K for optics or because their governance guidelines require minimum holdings. It tells you nothing about next quarter.

The only insider signal were worth watching:
- CEO/CFO buying &gt;$1M with their own cash (not options)
- Cluster buying (3+ insiders at the same time)
- Size relative to compensation matters. For example a CFO buying $2M when they make $500K is a different signal than a board member buying $200K when they're worth $50M

Also point to note insider buying is generally a conviction signal about the next 12 months, not the next earnings print.

### Methodology

- 80 stocks that moved &gt;3% on earnings (Jan 27 - Feb 13, 2026)
- Insider data from EDGAR Form 4 filings, last 3 months
- Only counted open market purchases (code P), not option exercises or grants
- Price data from Polygon
- Filtered to market cap &gt;$100M

Summary

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