Restricted Stock

Stock owned by company insiders that has restrictions on its being sold on the open market. This is usually to prevent insiders from cashing out immediately after a deal (such as an IPO) and adversely impacting the market with sell orders.

Some funds have made a profit by buying restricted stock at a discount to market price from insiders who wished to liquidate part or all of their holdings and holding till they were able to sell. This is covered in the “New Market Wizards”. It is an ingenious method which just goes to show that there is more than one way to make money in the stock market.