On the other hand, insider selling, while not a good sign, may not necessarily be as bad as it first seems. Many companies base executive compensation programs on stock, which leaves insiders with no practical way of buying new homes or sending their children to college other than by selling their holdings. Furthermore, insiders often have only a few weeks each quarter in which to accomplish these transactions. This is to prevent them from trading on information that hasn't yet been released to the public. Having said that, insider selling generally does not imply confidence in a company's future; and if they're selling in large quantities, that's a very poor signal indeed.

Of course, the abovementioned events are only a very abbreviated list of factors that can affect market perceptions of future earnings or investors' confidence that earnings will be met. Regardless of the investment strategy or style that you employ, be aware that these issues must always be taken into account.