Talk about placing big bets…

According to Thomson Financial and The Wall Street Journal, four Merrill Lynch executives purchased a total of $16.7 million dollars’ worth of company stock on July 29 at $22.50. This morning, Merrill Lynch (NYSE-MER) trades at $27.30. MER’s all-time high was $94.17 in May 2007, or 71% below its current ask price. That’s a crash.

John Thain, Merrill Lynch’s CEO, purchased a hefty $11.2 million of that $16.7 million bundled transaction last month. That’s an enormous transaction for a corporate insider considering the average purchase size is just $65,000.

I rarely mention a specific stock recommendation on my daily Blog. But I wanted to introduce you to the power of global insider transactions and the potential for profits. I’m not sure John Thain and his buddies are making the right trade or that riding Merrill’s executives on this purchase will eventually yield a big capital gain; but I’d say the odds are pretty favorable that these guys know something that we don’t at this price level. I will disclose, however, that I bought MER stock on Monday at $26.

In this very difficult market environment since last August, investors need all the help they can get – including yours truly. And following what the insiders are buying in the United States and overseas can generally yield some fat profits. Let me give you an example.

I’ve recommended several insider stocks since 1992, including one last fall for my Commodity Trend Alert (CTA) service. That stock, an oil exploration company, gained over 120% in less than nine months before we closed the position earlier this summer. Others have done similarly well over the years while only a few have bombed.
What intrigues me about insider buying is the conviction embraced by corporate executives. These guys are making big bets, usually with cash purchases, on the future direction of their company’s stock price. I like that. It’s similar to hedge fund CEOs plunking most or all of their net worth into the funds they manage; they eat their own cooking.

Staring this fall, I’ll be launching a new Global Insider Stock service. I’ll track global insider stock purchases worldwide and only recommend the largest and most significant cash-based purchases.

I think global markets will be increasingly difficult over the next several years, not unlike the 1970s. Investors will require an edge to beat the market. Insider stocks fit that strategy.