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Cluster of Insider Buying at Clinical-Stage Vaccine Company, Massive Insider Selling at Analog Chip Giant, Plus Other Insider Trading

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A number of seemingly outdated but still relevant studies on insider trading claim that corporate insiders are contrarian investors. More importantly, those studies say that insiders predict market movements better than simple contrarian strategies. One of the studies I recently stumbled upon cited an article that said: “Company executives and directors know their business more intimately than any Wall Street analyst ever would. They known when a new product is flying out of the door, when inventories are piling up, whether profit margins are expanding or whether production costs are rising.”

We always hear about the smart money – the cash invested by those considered experienced and well-informed such as hedge fund managers. But one could also argue that insider trading behavior shows where the actual smart money goes. The thinking of many investors is that there should be a way to benefit from insider trading metrics. Based on the multitude of studies on insider trading I have skimmed through in the past several months, my recommendation for investors would be to go long companies witnessing clusters of insider buying while focusing on a long-term investment horizon just like insiders do. Having said that, let’s refocus our attention towards a set of noteworthy insider transactions reported with the SEC on Thursday.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

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Executive at U.S. Industrial Giant Buys Shares

One member of General Electric Company (NYSE:GE)’s management team purchased a block of shares at the beginning of the week. Jeffrey S. Bornstein, Senior Vice President and Chief Financial Officer for GE Company, bought 5,000 shares on Tuesday at a price tag of $29.63 each. Mr. Bornstein currently owns an aggregate of 68,757 shares, excluding the 38,855-share block held in his 401(k).

Earlier this year, the global digital industrial company announced plans to move most of its in-house tax staff to PricewaterhouseCoopers in a tax outsourcing-like arrangement that is unusual for big multinational companies. The timing of the arrangement appears to be ideal for General Electric Company (NYSE:GE), considering the increasing number of tax scandals facing big companies. The implementation of new transfer pricing compliance requirements across the globe – transfer pricing has been an important tool for tax avoidance (not tax evasion) for decades – will likely lead to a jump in tax scandals around the globe. General Electric’s move could protect the industrial giant against reputational risk should the company face a tax scandal similar to the one faced by Starbucks Corporation (NASDAQ:SBUX) several years ago, for instance. The Seattle-based coffee house faced a boycott in 2012 after news emerged that the company paid corporate tax in the UK only once since arriving in the region in 1998. General Electric’s shares are up by a little less than 2% in the past year. Ken Fisher’s Fisher Asset Management reported owning 31.73 million shares of General Electric Company (NYSE:GE) in its 13F for the fourth quarter.

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On the next two pages of this insider trading article you’ll find a discussion concerning the fresh insider buying and selling observed at four other companies.

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