One of the most common reasons that insiders will buy shares of a company’s stock is because they are required to do so. It’s not uncommon for a company to require a newly appointed executive or director to buy shares of the company’s stock. In fact, the most common reason is to execute stock options.
While stock options can be a sensitive topic, the thinking behind this is that these insiders will be more inclined to make decisions that are in the best interest of all shareholders…because they own shares themselves. But by itself, this activity should not be seen as a buying signal for outside investors.
However, there are times when company insiders buy stocks because they believe that the company’s stock is undervalued in the market. And yes, this may be based on information that they believe will cause the stock to move higher. Whether this is insider trading will depend on several factors other than having access to information.