The Insiders Portfolio

The Insiders Portfolio focuses on those stocks where the people who know the company best are buying - and buying heavily!

In his book, Investment Intelligence from Insider Trading, Nejat Seyhun, who just happens to be a leading researcher in the field of insider buying and selling, illustrated that when top executives bought large amounts of his/her company's stock, the stock outperformed the broad market by +8.9% over the next 12 months. And given that the long-term average annual return for the stock market has been +9.5% over the past 70 years, this means that stocks with heavy insider buying produce returns that are 93.7% higher than the market indices.

And then on the other hand, when an insider sold large amounts of his/her stock, Mr. Seyhun found that the stock underperformed the market by -5.4%, which is nearly 60% less than the market returns.

In addition, corporate insiders are often considered the "smart money" by Wall Street. For example, the research firm of Ned Davis Research reports that corporate insiders tend to be "relatively bullish at lows and relatively bearish at tops."

So, doesn't it make sense to (1) invest in stocks where the corporate insiders are buying and (2) avoid any company where the insiders are selling?

If your answer is yes, then the Insiders Portfolio may be just the ticket for you.

While the stock market can be challenging at times, our Insiders Portfolio has proved successful in most every market environment. For example, according to our research, those stocks where corporate insiders were buying heavily have returnd +27.7% per year since early 1992, which is nearly three times the the buy-and-hold return of +9.86%. In addition, our portfolio of insider stocks actually went up handsomely during the brutal bear market of 2000-2002.

And here's one of the best parts - managing a portfolio focused only on stocks where the corporate insiders are buying heavily, really isn't that hard! In short, it only takes about 15 minutes a week to stay in tune with the portfolio.

How the Insiders Portfolio Works

The strategy is easy to summarize: Instead of owning the biggest companies in each sector - as the S&P 500 Index does - our plan is to own ONLY those companies in which the corporate insiders are buying - and buying heavily!"

Every week the computers scour the available research on insider buying and selling and then create an "insider score" for each and every stock. Then, in keeping with our overall goal to "own the best and ignore the rest," we create a list of all the stocks with the highest insider score (the top 20%).

From there, our team painstakingly reviews each of the top rated stocks on an individual basis. We check out the charts from a technical perspective. We review our proprietary rating for Earnings Strength. And we check our long-term fundamental models. While it takes an enormous amount of time and energy, the goal is to identify the top rated stocks where those in the know just happen to be buying - and buying heavily!.

To sum up, only those stocks with the strongest performance, the top earnings strength, and the best insider ratings "make it" into our Insider Portfolio.

Let's Talk Performance of Insider Buying

Performance results for Insider Portfolio from 12/15/2008 - 8/20/2012.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Before we decided to go "live" with this concept, we hired the largest institutional research firm in the country to conduct an independent test of the system. The test found that by making small adjustments to the portfolio each week, the system had exceptionally impressive results.

To sum up, between March 6, 1992 and September 30, 2008, which was a period that contained three of the greatest Bull Markets of all time and one of the worst Bear Market in a generation, the strategy would have produced a compound average annual gain of +27.7% per year. (At that rate money doubles every 2.6 years!)

Do Insider Ratings Really Matter?

We certainly think so, but sometimes it is best to let the numbers do the talking. Below is a table showing the average annualized returns for each rating category, as determined by historical testing performed by one of the country's largest independent institutional research firms.

We Tell You EXACTLY What We're doing

Every week, we send members a TRADE ALERT! detailing the changes that we are making to the portfolio. It's that simple. We tell you what we're buying and what we're selling.

We Publish Performance

At StateoftheMarkets.com, we believe that performance is job # 1. And unlike so many newsletter services out there, we don't hide our performance. Every week we will send a Portfolio Roundup which includes a summary of any changes that we've made as well as the current performance to the portfolio.

To sum up, we do all the legwork, we you EXACTLY what we are about to do and why, and then we follow it up with a performance summary every week.

What You Receive

Before anyone becomes a member of our service, we feel it is important for them to understand exactly what they will be getting from us. So here's a summary of the reports you will begin receiving once you've signed up for a free-trial:

Real-Time Trade Alerts - We send a real-time ALERT! via email BEFORE every trade we make. These live reports tell members EXACTLY what we are about to do and why we are doing it. And to avoid any conflicts, it is our policy to wait until after we have received the ALERT to actually enter our trades. Each ALERT! includes:


• Company Name
• Ticker Symbol
• Position Size

Weekly Round-Up - Every week we update members on trading activity, current holdings, and performance of our portfolio.

Daily State of the Markets - As a TopStockPortfolios.com member, you'll receive our "Daily State of the Markets" market analysis and commentary each morning BEFORE the opening bell.

All the SOTM Reports - In addition, you can choose to receive any or ALL of the following reports: (just click on the reports you'd like to receive in Your Account)

• Fash Headline Alerts - Up to the minute market-moving news
• What's Driving Today's Market - The key story of the day
• The Big Picture Report - Stay in tune with major market cycles
• Daily Stock Pick - Our pick of the day
• Daily Focus List - The TopStocks we're watching today
• The 10.0 Report - The REAL "Best of Breed"
• The Risk Manager Report - Understand the Risk/Reward environment
• Market Model Roundup - We quantify the current market
• The SOTM 100 - The TOP 100 stocks (updated monthly)
• IRA/401(k) Portfolios - TSP Portfolios for your long-term assets
• Top Stories - Never miss an economic report or top story

Risk Management Strategies Are Built In!

Perhaps the best advice we can provide investors is simple: Stop Feeding the Bears!

As the saying goes, "sometimes the best offense is a good defense." So, in addition to a powerful stock selection strategy designed to outperform by a wide margin in Bull markets, the Insider Portfolio also has a risk management strategy built into the portfolio for when the Bears begin to growl.

Our disciplined sell strategy is actually pretty darned simple. You see, we have no tolerance whatsoever for stocks that are not technically healthy from a chart standpoint. Thus, whenever one of our holdings moves into a downtrend or breaks important support -- we sell the stock, no questions asked.

While it may sound simplistic, this "bottom up" or stock-by-stock approach to managing risk causes us to automatically reduce exposure to market risk during bear markets. And since one of the best ways to make money in the long run is to avoid losing big money in the short run, this approach is an easy way to protect your net worth during bear market periods.

Let's Talk Price

The Insiders Portfolio is a "pro level" portfolio that can easily replace those closet-index funds in your portfolio. And instead of paying asset managers 1% of your portfolio, you can run your own privately managed portfolio for just $349 a year, which is less than $30 per month!

So if you are looking for an easy way to invest the exciting world of TopStocks, be sure to give this service a try!

Wishing you green screens in your investment endeavors,

David D. Moenning
Founder and Chief Investment Strategist 

The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

The information contained in our websites and publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

The performance of the Insider Ratings are linked monthly price changes of equal weighted hypothetical portfolios consisting of those stocks with the indicated TopStock Insider Rating assuming monthly rebalancing zero transaction costs. Results do not include dividends and are from the time period 3/3/1992 through 9/28/2008.

The returns shown for the Insider are a hypothetical implementation of the portfolio strategy allocating equal portions of the portfolio to the Insider Ratings of 4 - Heavy Buying. Hypothetical returns do not reflect actual trading. Please note that hypothetical test results do not take into account market conditions which could adversely affect management decisions.

Index returns are price only and do not include the reinvestment of dividends. The S&P 500 is a stock market index containing the stocks of 500 large-cap corporations, most of which are US companies. The index is the most notable of the many indices owned and maintained by Standard & Poor's, a division of McGraw-Hill. S&P 500 is used in reference not only to the index but also to the 500 companies that have their common stock included in the index.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.