Imagine you’re an executive at a public company.

A big part of how you get paid isn’t just salary. It’s company stock.

Each year, you’re granted shares or stock awards that become yours over time.

After a few years or decades in leadership, that can easily add up to millions of dollars in company stock sitting in your account.

So even if you’ve built savings elsewhere, a huge portion of your wealth is tied to one company.

This is why executives regularly sell portions of these holdings.

They sell to diversify, pay taxes, buy homes, fund investments, or simply reduce their exposure to a single stock.

On the flip side… there is really only one reason for an executive to buy more shares.

They think the stock is going higher.

After months of watching beaten-down software stocks get hammered, insiders are finally stepping in to buy their own shares.

Yesterday, a filing revealed that ServiceNow (NOW) CEO Bill McDermott entered into an agreement to purchase $3 million worth of company stock on February 27th.

At the same time, he and several other top executives, including CFO Gina Mastantuono, terminated their 10b5-1 trading plans, which typically allow insiders to automatically sell stock over time.

In other words, leadership stopped selling and started buying.

ServiceNow shares initially popped on the news before giving back some of the gains, but the message was clear: management believes the stock is undervalued.

That matters.

Academic research consistently shows insider buying is one of the most reliable signals investors can follow.

• A landmark study by Jeng, Metrick, and Zeckhauser examined decades of SEC insider filings and found that portfolios built from insider purchases outperformed the market by more than 6% annually.

• Another major study by Lakonishok and Lee reached a similar conclusion: insider purchases tend to predict future outperformance, especially when multiple executives buy shares around the same time.

• And research from finance professor Nejat Seyhun has long shown insider buying tends to increase when stocks are undervalued or business conditions are about to improve.

The takeaway is simple: insiders sell for many reasons like diversification, taxes, liquidity, and estate planning.

But insiders buy for only one reason.

They believe their stock is cheap.

That’s why this moment is interesting.

Despite strong earnings and solid guidance, many software companies have been punished this year as investors worry AI tools like ChatGPT, Claude, and Gemini will disrupt traditional enterprise software.

Stocks like ServiceNow have been dragged lower along with the rest of the sector.

But now, executives are stepping in with their own money.

I view this as a signal that it’s time to start nibbling at ServiceNow and other beaten-down software names.

If you want to track insider activity yourself, my favorite free tool is Finviz.

Just type in a ticker and scroll to the bottom of the page to see recent insider transactions.

Because when insiders start buying, it’s worth paying attention.