Jensen Huang Told Investors to “Buy at a Discount” on June 8. History Says This Is How Often CEOs Who Publicly Call the Bottom Are Actually Right. | The Motley Fool

Nvidia (NVDA -2.91%) CEO Jensen Huang is known for his ability to see the future, but a recent prediction he made may be one of his most important ever, at least from an investor perspective.

Huang told investors to buy the stock on June 8 at a conference in Seoul, South Korea, saying, “We’re at the beginning of it, and whatever happened to the stock market, you should be very happy because now you can buy at a discount.”

Nvidia had pulled back around 10% from its all-time high a few weeks earlier, but thus far, that prediction has not paid off as Nvidia is essentially flat since then.

However, that’s not a reason to give up on Huang or the world’s most valuable, but his comment does raise the question of whether a CEO should be trusted when they urge investors to buy their company’s stock or when they buy it themselves.

What history says about CEO predictions

There’s no strict data set that shows how stocks have performed after comments like Huang’s above. However, there is some evidence that these kinds of predictions are correlated positively with outperformance over the long term.

According to one study, stocks that are heavily purchased by their own CEOs have outperformed the broad market by 4%-6% over the next 12 months.

Some of the most admired CEOs have also made insider purchases that have portended long-term gains in their stocks.

For example, Jamie Dimon bought 500,000 shares of JPMorgan Chase stock in early 2016 when bank stocks were…