Over time, the wealthiest people of all have either been those who have invested in their own businesses from the ground up or those who have consistently picked the best stocks. Elon Musk and Warren Buffett spring to mind as standout examples, but they are just the tip of the iceberg.
There are thousands upon thousands of company insiders and institutional money managers making intelligent decisions day in and day out. These professionals spend all of their working lives considering how to allocate their capital as profitably as they possibly can. How can we, as individual investors, hope to compete?
Well, the good news is that we don’t need to compete - we can instead learn to read the signals these investors leave behind.
Years of academic research have found smart money signals to be excellent at predicting future share returns. Here at Stockopedia, we have analysed these research papers and conducted some research of our own to help you make the most of the signals from smart money.
In the following chapters, you will find the most important signals sent out by company insiders, institutional fund managers, short sellers and research analysts, including:
Insider purchases predict positive returns, whilst sales do not have the same level of predictive power.
Stocks that beat analysts’ earnings and sales forecasts have been found to outperform the market over the subsequent six months.
Broker recommendations and price targets—though widely followed—can be misleading.
Tracking institutional fund managers' boldest bets—such as concentrated portfolios with fewer than 30 stocks or stocks not widely held across funds—can help uncover high-potential investments.
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