Analysis of Insider Dip Buying Strategy Performance vs S&P 500

The analysis combines a Reddit post’s findings (post-2008 insider dip buys using Form 4 data) with recent market trends [1]. The Reddit study found that insider purchases during 10-30% dips outperform the S&P 500, with deeper dips correlating to higher returns [3]. However, this strategy has a lower win rate (60% vs S&P’s 90%) and higher volatility [3]. Recent data shows insiders are buying at the fastest pace since May 2025, with a buy-to-sell ratio of 0.5, amid rotation out of overvalued tech stocks [1]. The S&P 500 has gained 12.91% over the past year with 1.20% volatility [0].

1. Upside Skew
   : The strategy offers significant upside (2-3x outperformance claims) but at the cost of lower win rates, making it suitable for investors with high risk tolerance [3].
2. Timing Limitation
   : Insiders have company-specific knowledge but do not always time market bottoms effectively; recent buys reflect sector rotation rather than broad market timing [1].
3. Sector Trends
   : Defensive sectors (Energy, Consumer Defensive) are leading recent gains, aligning with insider buying trends [0].

• Lower win rate increases short-term loss likelihood [3].
• Higher volatility requires tolerance for price swings [3].
• Insider timing risk (buying too early during downturns) [1].

• Defensive sectors may offer opportunities amid tech rotation [0].
• Deeper dips (10-30%) present higher return potential [3].

The insider dip buying strategy shows promise for outperformance but comes with trade-offs. Investors should consider verified data (since Reddit’s 2-3x claim is unconfirmed) and sector-specific trends. The S&P 500 remains a safer option for low-risk investors, while the insider strategy suits those seeking higher upside with higher risk.