What happened
Shares of Acacia Research Corp. (ACTG 0.83%) jumped as much as 22.2% in trading Tuesday, after the company disclosed that insiders bought a total of 67,400 shares in the past few trading days. Shares slipped slightly as the day wore on and at 3:40 p.m. EDT were up 10.5% on the day.
So what
Five insiders made the acquisitions, including President Robert Stewart and CFO Clayton Haynes. A reason wasn't given for the purchases, but when a large number of insiders buy shares of a company, it's likely they know good news is ahead and are using a short window of opportunity to buy.
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Investors generally see insider buying as a bullish sign for a stock, which is why shares are trading higher today. Time will tell if the buying came ahead of publicly disclosed information that will keep the momentum going.
Now what
Buying shares on insider buying alone isn't a great idea, but it can be a good data point to put into your investment thesis. Acacia's shares have been pummeled the past few years, and management may be seeing this as a buying opportunity. But investors should make sure the company's performance matches management's recent bullishness, because if it doesn't, the stock's bounce won't last long.
