Insider Sellers Momentum

On the first Monday of every month this strategy takes the 1,000 most traded U.S.-listed companies with Form 4 filings — ranked by median daily dollar volume over the 20 trading days before, with at least $1 million a day, a price of at least $2, a year of price history and no blank-check companies. From those it takes the 40 with the highest momentum: the price change over the past twelve months, leaving out the most recent month. Within those 40, companies whose directors and officers sold at least $250,000 more than they bought in open-market trades over the preceding 90 days come first, by momentum; the rest follow, by momentum, until twenty are chosen. They are held in equal weights. A company that enters is bought on the next trading day; one that drops out is sold; one that stays is left alone. Insider filings count from the day they were filed, and only if they were public before that Monday.

It starts at USD 100,000 on Jan 3, 2022 — the day the rule first had something to act on — and the S&P 500 stands next to it from the same amount on the same day. Each trade costs 0.1% one way, 0.2% round trip.

What it does not do

• It is long-only. There is no short leg and no leverage; a company leaving the selection is sold, never sold short.
• Insiders only reorder the shortlist. The forty names come from price momentum alone; insider selling decides which of them make the twenty, not which companies are considered.
• It counts open-market trades by directors and officers. Sales the filing marks as made under a pre-arranged 10b5-1 plan are left out; before April 2023 the form had no such box, so those sales count.
• The universe is today's survivors. Price history exists mostly for companies that are still listed, which flatters a momentum rule; the curve is not corrected for it.
• The backtest is in-sample. The rule was written down with the same filings and prices the curve runs over, so it says what the rule would have produced on data we already had — it is not a forecast.
• The portfolio uses adjusted closes, so dividends are in it; the S&P 500 line beside it is a price index without dividends.

Every figure here is a calculation over filed forms, made afterwards, under assumptions that are written down. A backtest says what a rule would have produced on filings that were already public. The definitions are on the methodology page.