Short answer: barely. When insiders bought a stock that had already fallen 20% or more over the previous three months, it beat the S&P 500 over the next 90 days 46.5% of the time (4,000 cases since 2020). That's a hair better than insider buys in general (45.8%), and well short of a coin flip.
The picture changes a little when several insiders buy into the drop together. Here's the full breakdown.
What happened after insiders bought
We split every open-market insider purchase since 2020 by what the stock had done in the three months before:
| Stock before the buy | Cases | Beat the S&P 500 | Typical 90-day move | Median vs. S&P 500 |
|---|---|---|---|---|
| Down 20% or more | 4,000 | 46.5% | +5.7% | −2.0 pts |
| Down 0–20% | 6,193 | 45.5% | +2.7% | −1.6 pts |
| Up | 6,706 | 45.6% | +2.6% | −1.4 pts |
Beaten-down stocks did bounce: the typical one rose 5.7% in the 90 days after the insider buy, about twice as much as the others. But the S&P 500 often rose too, so measured against the market most of them still came up short.
When several insiders buy the dip
| Setup | Cases | Beat the S&P 500 | Typical 90-day move |
|---|---|---|---|
| 3+ insiders after a 20%+ drop | 809 | 49.4% | +10.1% |
| …with no CEO or CFO among them | 278 | 49.6% | |
| …including the CEO or CFO | 531 | 49.3% | |
| $1M+ bought after a 20%+ drop | 902 | 45.0% | +4.1% |
Three or more insiders buying after a big fall had one of the highest beat rates of any setup we tested in 16,899 cases, and it held up in both halves of the data (48.7% before April 2023, 50.4% since). Even so, it's a coin flip, not an edge. Big-dollar buys after a drop did no better than average.
Why "buying the dip" isn't a free lunch
- Stocks that fall 20% often fall for a reason. An insider's purchase doesn't undo bad news, a weak quarter or a debt problem.
- The bounce is real but the market bounces too. A 5–10% recovery can still trail the S&P 500 over the same three months.
- A falling price can make a buy look more confident than it is. Insiders may simply think the stock is cheaper than it was, not that it will beat the market.
How to use this
If you follow insider buys, a drop on its own adds very little. What helped, a bit, was breadth: several different insiders putting money in within two weeks. That's the definition of a cluster buy.
- Try "3 or more insiders" + "Down 20%+ in 3 months" in the Backtester, and change the years to see how stable it is.
- See today's stocks where insiders bought after a fall on Setup Odds.
- Or test your instincts on five real cases in today's Insider Call.
Data: SEC Form 4 filings and SEC insider transaction data sets, 2020 to October 2026; "drop" is the price change over the 91 days before the filing. Price-only returns, no trading costs; delisted stocks often drop out, which flatters results. History, not a prediction, and not investment advice.