How to Use Financial Reports to Find Out about Insider Ownership

By Lita Epstein

As an investor, using financial reports to tracking the owner of stock by insiders can give you a good idea of how they feel about owning the company’s stock. If most of the insiders buy the stock, it’s usually a good sign — the insiders believe in the long-term performance of the company. But if you find that insiders primarily sell their holdings, trouble may be brewing.

Forms 3, 4, and 5 are used to file information about holdings by individuals or entities who are directors, officers, or major shareholders (holders of more than 10 percent of the stock). Keep your eye on these three important forms to find out what insiders think of the stock:

  • Form 3: Filed when an individual or entity first takes ownership of stock

  • Form 4: Filed when an individual or entity changes ownership of stock

  • Form 5: Filed as an annual statement summarizing changes in stock ownership of directors, officers, or major shareholders

You can find forms filed with the SEC, but it’s easier to use certain financial websites to track stock transactions made by company insiders. On Yahoo! Finance, after you get to the main page for a particular company, you find a link in the left column for insider transactions. You can also get a list of major stockholders by using the link in the right column for major holdings.