There are many reasons insiders sell shares of the company that they work for. Examples include sending kids to college, buying a house, covering a tax bill or even just engaging in sensible financial planning involving asset diversification. I'm not saying that insider selling is meaningless as an indicator, especially when it comes from multiple insiders in large amounts at the same time... But it isn't necessarily a bad omen. Insider buying, on the other hand, is a very different story. There's only one reason for an insider to take their hard-earned cash and buy shares of a company in the open market, no less shares of their own company... They think those shares are going to go higher. This is why smart investors pay so much attention to insider buying, especially when it's done by a prominent insider, like a CEO. In July 2020, I wrote about the single biggest insider buy that I had ever come across in my almost 30 years of stock market investing. CEO Prem Watsa of Canadian reinsurer Fairfax Financial (OTC: FRFHF) had just backed up the truck in the previous quarter and made a massive insider buy. The total dollar amount? An astounding $150 million. For perspective, that's an absurdly large insider buy - perhaps the largest in history. Because the purchase was so incredibly large, Fairfax was obligated to explain it. The company's press release included the following quote from Watsa: At our [annual general meeting] and on our first quarter earnings release call, I said that our shares are 'ridiculously cheap.' That statement reflected my recognition that in the 35 years since Fairfax began, I have never seen Fairfax shares sell at a bigger discount to their intrinsic value than they have recently. I have now backed up my strong words by purchasing close to US$150 million of Fairfax shares in the market over the last few days, as I believe that this will be an excellent long term investment.
Given the size of Watsa's share purchase, we didn't really need an explanation. Regardless, we got a precise one. The man in charge of Fairfax Financial was pounding the table on his own company's shares and telling us to buy. Since then, Watsa and anyone who followed his lead and bought shares of Fairfax have made a lot of money. I hope you jumped on it when I wrote about this in the middle of 2020. Despite that nice rise in Fairfax's share price, I think the stock is still very attractive at current prices. More importantly, so does CEO Watsa! He knows the value of this company better than anyone. | 
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