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Investor takes his cue from insider-trading signals

Markus Aarnio, 37


Full-time investor

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The portfolio

Half in basic materials stocks (includes Allana Potash Corp., Brigus Gold Corp. and Thompson Creek Metals Co. Inc.), the other half in stocks with significant insider trading (currently includes Navidea Biopharmaceuticals Inc., Amarin Corp. and BioTime Inc.).

The investor

Markus Aarnio lives in Finland and has been investing since 1996.

How he invests

"I first look at what the insiders are doing," begins Mr. Aarnio. "I try to find the sectors that have seen the most insider purchases. If I see no insider buying, I will get worried and move to cash and short positions."

He will buy stocks that have had intensive insider buying during the past month. He defines this as: three or more insiders buying during the month; no insiders selling during the month; and two or more insiders increasing holdings more than 10 per cent.

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He will short (borrow and sell) stocks with intensive insider selling, which he defines as: three or more insiders selling during the month; no insiders buying during the month; and two or more insiders decreasing holdings more than 10 per cent.

"Currently, I see insiders buying basic materials stocks while all the other sectors have had intensive insider selling," says Mr. Aarnio. So he is raising exposure to the resource sector and selling stocks in other sectors.

Best move

In 2012, he earned a gain close to 1,000 per cent trading Arena Pharmaceuticals Inc.

Worst move

In 2013, his gold stocks were big losers.

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The next bubble

Mr. Aarnio saw the dot-com and housing bubbles unfold. He believes the next one will be in the gold sector, despite its dismal performance in 2013. "The global expansion of monetary supply should continue to provide gold investments with a positive environment, and end up in a bubble," he predicts.


"Develop a trading system that you can follow no matter what happens in the markets."

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