Investors love to talk about insider buying. A CEO grabs a few shares, and suddenly it’s hailed as a bullish signal. The truth? Most of those single trades don’t mean much. One executive can buy stock for optics, for confidence signaling, or simply because they can afford to. It’s noise more often than not. The real signal comes when you see clusters, multiple insiders, often across the C-suite and board, stepping in together. That’s rare, and it usually tells you something powerful: management as a group believes the stock is undervalued, and they’re willing to put their own money behind it. In my 35 years studying catalysts, clustered insider buying is one of the most overlooked but reliable tells.

The question is why clusters matter so much, what they reveal about management conviction, and how investors can use them to find opportunities before the market catches on.

Why Insiders Matter

When it comes to signals in the market, few are as transparent as insider buying. Executives know their businesses better than anyone, and when they put personal capital on the line, investors take notice. But the predictive power of insider activity isn’t uniform. Studies confirm that insider purchases can lead to outperformance, yet most investors fail to separate the signal from the noise. The reality is that isolated insider buys are often just that, noise. A single trade might reflect tax planning, optics for the market, or simply a routine allocation. They can create excitement but rarely carry weight on their own.

Clusters are different. When you see multiple executives, the CEO, CFO, and directors buying within a short window, that’s conviction. It’s rare, and it usually points to undervaluation that only those inside the boardroom fully appreciate.

The Data On Clusters

At The Edge, we’ve studied catalysts for over a decade, and the numbers are clear: when it comes to insider activity, clusters win. Companies with multiple insiders buying in the same window consistently outperform those with isolated trades.

Our research shows the difference is not subtle. Isolated insider buys often fade into background noise. But when three or more insiders step in together, the average outperformance climbs sharply. It reduces the risk of false positives, confirms that leadership is aligned with shareholders, and often coincides with a larger catalyst in motion, whether that’s a restructuring, spinoff, or a balance sheet reset.

You can see the same pattern in our broader catalyst data. In Consumer Staples, for example, spinoffs that later drew takeover bids returned +112.4% on average before completion, with a +17.7% takeover alpha at the announcement. Those weren’t accidents. Insiders were often the first to step in, backing their conviction before the market repriced the asset.

Take (PHIN), spun from BorgWarner. The cluster of insider buys early on was a strong tell. The stock doubled within months as investors realized what management already knew: the standalone business was undervalued. Single trades can be noisy, but clusters represent strong conviction. And conviction, when paired with a catalyst, is where real returns are made.

Behavioral Angle

It’s easy to forget, but executives are human. A single insider purchase might reflect personal confidence, a show of loyalty, or simply excess liquidity. That doesn’t always translate into future stock performance. Clusters are different because they carry social and reputational weight. When the CEO, CFO, and multiple directors all commit capital within the same window, they’re not just risking dollars. They risk their credibility with each other and with shareholders. If the bet goes wrong, it isn’t one person looking foolish; it’s the entire leadership team. This increases the risk and strengthens the significance of clustered buying as an indicator of genuine conviction.

Markets often misprice this. They combine all insider activities into a single category and neglect to distinguish between a token purchase and a coordinated action by the boardroom. But the weight is not the same. A cluster signals alignment, shared risk, and confidence that undervaluation is real. For investors willing to dig deeper, recognizing that distinction is key. Not every insider buy is worth your attention. The clusters are the ones that matter.

Real-World Examples

In addition to (PHIN) , look at (AMRZ), the (HOLN.Z.IX) spinoff. Nearly the entire C-suite stepped in with purchases shortly after the spin. This wasn’t symbolic; it was coordinated. The signal was clear. Leadership believed the standalone business was trading too cheap relative to its long-term trajectory. The stock, once ignored, quickly rerated higher as investors realized they were missing the story.

Clusters reveal the truth even in established names. (WDC) insiders bought heavily before restructuring news began to circulate. The alignment from multiple executives was a stronger tell than any single purchase. When restructuring catalysts became public, the stock moved sharply, rewarding those who followed the cluster.

Contrast that with the hundreds of isolated insider trades investors chase daily that never lead anywhere. The difference isn’t subtle. Clusters point to undervaluation tied to catalysts. Single trades often fade into noise. The takeaway is simple: markets reward those who separate conviction from tokenism. Insider clusters give you that clarity if you’re paying attention.

How Investors Can Use This

Spotting insider clusters isn’t complicated, but it requires discipline. The key is to separate genuine conviction from background noise. 

First, look for three or more insiders buying within a short window, ideally 30 to 60 days. Anything less can still be intriguing, but the statistical edge shows up when multiple executives step in together. Second, weigh seniority. When the CEO, CFO, and board members are all buying, the signal is far stronger than when a mid-level officer takes a token stake. The finance chief's purchase alongside the chief executive is one of the clearest indicators you can find. Third, pay attention to size. A purchase that’s meaningful relative to an insider’s existing holdings carries more weight than a small symbolic buy.

Finally, tie insider clusters back to catalysts. They often appear ahead of restructurings, spinoffs, or M&A. Moments when insiders know the business is about to be revalued. That's the ideal place to blend behavior with structural change. Used correctly, insider cluster analysis isn’t just another screen. It's a strategy for tracking management's financial trail and positioning yourself ahead of the market.

Investors talk about insider buying as if every trade carries the same weight. It doesn’t. One-off purchases can be noise. Insider clusters, on the other hand, are convictions. The CEO, CFO, and directors all say the same thing: the market is wrong, and they’ll risk their own money to prove it.

Clusters consistently beat isolated buys because they reduce the risk of false signals, show true alignment with shareholders, and often precede the very catalysts that force value into the open. Don’t chase every headline about insider activity. Focus on the clusters. That’s where management’s real confidence shows and where investors can capture the kind of outperformance that others miss.

If you want to know where the edge lies, follow the cluster.