Strategies of Enhanced Investments

Introduction to Follow The Insiders Strategy

The strategy buys and shorts stocks for which in the last 30 days were recorded, respectively, the largest purchases and sales of insiders for $1 million or more.
The strategy buys and shorts stocks for which in the last 30 days were recorded, respectively, the largest purchases and sales of insiders for $1 million or more.
Top management, directors, or major shareholders often make lucrative deals to buy and sell shares in the company they manage
Company directors, top management, and major investors are called insiders. They have the most complete information about what is going on in the company, its reporting, and existing projects.
To regulate the performance of insiders to smaller shareholders, they are prohibited from using non-public information for making profits, and if used, it will be considered fraud and punishable by law.
Insider trading is not always illegal. Let's look at how insiders can make trades:
For stock transactions, insiders must notify the Securities and Exchange Commission (SEC) and fill out special forms.
Each quarter, institutional investors and managers of more than $100 million must file a Form 13F with the SEC disclosing their transactions during the reporting period and current positions. However, the form is not due until 45 days after the end of the quarter, when positions in equities may have already changed.
An example of legitimate insider trading
Sometimes insiders buy a company’s stock on the background of positive industry conditions and analysis of the issuer.
For example, Warren Buffett's Berkshire Hathaway (BRK.B) bought $352.5 million worth of Occidental Petroleum (OXY) stock in the last 3 months (0.7% of capitalization as of 11.29.2022)

The stock is up +41% since the first purchase (02.03.22) through 11.29.22 VS the S&P500's -10% decline

Berkshire has been actively buying OXY stock in recent months, quotes have reacted positively to this event, and recently the SEC cleared the purchase of 50% of all Occidental Petroleum shares by Buffett's investment company. You can see below the change in the share price of OXY after the purchase of its securities by Berkshire Hathaway: the stock is actively growing

Also, insiders may sell their company’s stock in anticipation of a drop in prices
For example, the directors of Tesla were actively selling their company's stock in October. Over the past three months, sales totaled $3 968 million or 0.627% of capitalization as of 11.29.2022

The company’s shares have fallen since the sale, both against the background of the general market correction, as well as against the background of mass insider deals. The average drop was -30%

Insiders can buy a little bit of the company’s stock on an ongoing basis, expecting growth and keeping faith in its prospects
For example, top executives at Amerco (UHAL) consistently buy a little bit of their company's stock

Our IT platform automatically gathers data on insider deals for over $1 million on more than 2000 companies in the shortest possible timeframe, aggregates and correlates them with other insider deals by the same issuer over the past 30 days. If there were only buy or only sell trades, the strategy calculates the target portfolio structure of long and short positions, selects 15 companies with the highest insider deal volumes, and allocates capital into them
Preparing to launch our model required a precise formulation of the fundamental idea of the strategy, followed by its automation to obtain up-to-date data in the shortest possible time:
We were convinced that buying shares by insiders is a positive sign because they are the closest people to the company and have the most information. Accordingly, selling the stock is a negative for the stock price
We wanted to automate the collection and uploading of all the data so that they are dynamically published on the company pages on our website in the shortest possible time, and our app will receive PUSH notifications about insider deals
Next, we searched for the most convenient database for automatically parsing and uploading information on insider transactions for over $1 million for more than 2000 companies, now the "age" of a news item is only 2 days, which is much faster than the 13F form
After that, it was necessary to level the impact of uncertainty due to the presence of both purchases and sales by insiders
The system automatically monitors both current and past insider trades, and if there have been both purchases and sales in the last 30 days, the company is not considered for inclusion in the portfolio
After all, the modifications described above, we got an accurate picture of the insiders' positions in the company over the last 30 days, and then we could use this data to form the portfolio structure and make trades
After compiling a portfolio, the platform continues to monitor insider transactions on companies included in the portfolio, and if transactions occur in the opposite direction from our position, the system will generate a signal to exclude the security from the portfolio
Anyone can track insider trades for thousands of companies on their own, but it would take a lot of time and effort, and require good technical equipment. Also, there can be a negative lag between finding an insider deal and the market playing it back, when the news is already in the stock price and it is too late to buy it, because of the need to process huge amounts of information. Our strategy provides information at the fastest possible speed: just 2 days after the insider deal versus the end of the quarter (and still +45 days) at Form 13F
We have built a strategy that finds the latest relevant information, aggregates it, clears it of uncertainty, and produces an accurate insider position on the company in the shortest possible time. The strategy then recommends target shares of issuers in the portfolio
Backtest: the strategy’s return is 19X times higher than that of the S&P500
To test the profitability and reliability of the strategy, we conducted a Backtest from the beginning of 2015 to July 28, 2022.
The strategy has demonstrated a yield well above the market:

Strategy +1857%
S&P500 +98%

A quarterly analysis showed that the strategy’s returns were consistently higher than the market returns:

  • The S&P500 was growing by 2.6% on average per quarter, our strategy showed an average return of 11.1% per quarter, 5X higher
  • In 71% of quarters, the strategy’s returns exceeded those of the market
  • The correlation coefficient between strategy and market returns was 29.3%, with a weak positive correlation between strategy and market returns
  • Strategy volatility exceeded market volatility by 1.9X times: 15.5% vs. 8.4%
  • Potential return (19X) exceeded possible risk (1.9X)
For a more accurate analysis of the strategy, we conducted a backtest separately for long and short trades
Long-strategy showed a return of 7X times higher than the market:

Long-strategy +728%
S&P500 +98%

The strategy’s returns have consistently exceeded the market’s returns on a quarterly basis:

  • The S&P500 was growing by 2.6% on average per quarter, our strategy showed an average return of 9% per quarter, 3.5X higher than the market
  • In 65% of quarters, the strategy yield exceeded the market yield
  • The correlation coefficient between strategy and market returns was 68%, with a strong positive correlation between strategy and market returns
  • Strategy volatility exceeded market volatility by 2.5X times: 21.2% vs. 8.4%
  • Potential return (7X) exceeded possible risk (2.5X)
The short strategy showed positive returns, but slightly below the market:

Short-strategy +79%
S&P500 +98%


  • The S&P500 was up by 2.6% on average per quarter, as our strategy was
  • Strategy returns exceeded market returns in 35% of quarters
  • The correlation coefficient between strategy and market returns was -74%, with a strong negative correlation between strategy and market returns
  • Strategy volatility exceeded market volatility by 1.5X times: 12.4% vs. 8.4%

  • The strategy is excellent in a falling market, but it should not be considered separately, and its inclusion in a generalized strategy (long + short) can increase the profitability:

    • Return on generalized strategy +1857%
    • The yield of long-only strategy +728%
    • Return on short-only strategy +79%

  • And reduce the volatility of the portfolio:

    • The volatility of the generalized strategy exceeded the volatility of the market by a factor of 1.9X
    • The volatility of the long strategy exceeded the volatility of the market by 2.5X
    • The volatility of the short strategy exceeded the volatility of the market by 1.5X
After launch, the strategy shows results that are far ahead of the market

Actual Performance

PeriodStrategyS&P500

Day +1.5%-0.9%

Week +1.1%-3.0%

Since inception (2022-07-21) +13.2%+24.2%

Maximum drawdown 27.2%

Date of drawdown 2023-10-12

Sharpe ratio 0.44

Volatility (year) 22%

Portfolio (USD) and S&P500 dynamics (%)

chart technology by TradingView

Weekly price changes ($)


Company Share Price -w Price Change($)
Comstock Resources 11.5% 9.60 9.52 -0.8%
Liberty Media-Liberty (L-K) 11.5% 25.71 24.34 -5.3%
Talos Energy 11.5% 14.27 13.54 -5.1%
Cardlytics 11.5% 14.18 12.22 -13.8%
Eagle Bulk Shipping 11.5% 62.60 62.60 0.0%
Clearway Energy 11.5% 23.44 22.79 -2.8%
Lululemon Athletica 11.5% 342.71 352.47 +2.8%
OPKO Health 11.5% 1.26 1.23 -2.4%
Nasdaq -6.7% 61.55 60.35 -1.9%
Dell Technologies -6.7% 119.63 114.87 -4.0%
Keurig Dr Pepper -6.7% 30.45 31.50 +3.5%
Hyatt Hotels Corporation -6.7% 155.54 146.37 -5.9%
T-Mobile -6.7% 160.21 162.33 +1.3%
nCino -6.7% 32.70 29.41 -10.1%
Oracle -6.7% 121.51 114.88 -5.5%
Coupang, Inc. -6.7% 21.18 22.01 +3.9%
Dutch Bros Inc. -6.7% 32.33 29.97 -7.3%
MicroStrategy -6.7% 1 514.43 1 174.11 -22.5%
Workday -6.7% 266.58 252.22 -5.4%
Salesforce -6.7% 296.51 270.37 -8.8%
Elastic -6.7% 98.67 96.19 -2.5%
Arista Networks -6.7% 272.89 246.09 -9.8%
ConocoPhillips -6.7% 132.79 129.38 -2.6%
Portfolio +1.1%
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