Rules imposed by the U.S. Securities and Exchange Commission protect corporate insiders against allegations of illegal trading if their trades are conducted under pre-arranged trading plans set up at a time when insiders did not have material non-public information. 10b5-1 trading plans to sell shares at regular intervals or when a stock reaches a certain price can help insiders meet liquidity and portfolio management needs with a much lower risk of facing insider trading allegations. And that is the primary reason Insider Monkey avoids examining insider selling conducted under pre-arranged trading plans.
As executives and directors can theoretically sell shares for a wide range of reasons unrelated to their company’s conditions and future prospects, investors tracking insider trading metrics should differentiate between information-rich insider selling and uninformative insider selling. And by ignoring the activity related the so-called 10b5-1 trading plans, investors get rid of a bulk of uninformative insider selling. Leaving this discussion aside, the Insider Monkey team processed most Form 4 filings submitted with the SEC on Wednesday and pinned down three companies with notable spur-of-the-moment insider selling.
Through extensive research, we have determined that the due diligence that the investors in our database employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also shown that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).
Eldest Son of Walmart Founder Makes $68 Million Charitable Gift, Plus Other Insider Selling
Wal-Mart Stores Inc. (NYSE:WMT) registered some massive insider selling earlier this week. S. Robson Walton, retired Chairman of the company’s Board, reported the sale of 478,158 shares on Monday and 971,842 shares on Tuesday at prices varying from $70.67 to $71.86 per share. These freshly-sold shares were held by the Walton Family Holdings Trust, which continues to own 173.17 million shares. Mr. Walton, the eldest son of Helen Walton and Sam Walton, the founder of Walmart, also made a charitable gift of 940,000 shares on Monday, which reduced his direct ownership stake to 1.99 million shares.
The retail giant has seen its market capitalization gain 18% since the beginning of 2016. In an era when most brick-and-mortar retailers are struggling because of fast-toughening e-commerce competition, Wal-Mart Stores Inc. (NYSE:WMT) has been successfully defending its “recession-proof” title. The world’s largest retailer has enjoyed seven consecutive quarters of positive comparable sales, mainly driven by six consecutive quarters of positive traffic. The biggest threat to the Arkansas-based behemoth is e-commerce giant Amazon.com Inc. (NASDAQ:AMZN), but Wal-Mart has been busy expanding its presence in the e-commerce space as well. Just recently, Wal-Mart announced the beginning of a 30-day free trial for ShippingPass, a two-day shipping program designed to win customers from Amazon’s highly-popular $99 per year Prime program. ShippingPass was launched earlier this year and costs $49 per year for unlimited two-day shipping.
The number of hedge fund vehicles followed by Insider Monkey with stakes in the giant retailer increased to 54 from 49 during the January-to-March period. Warren Buffett’s Berkshire Hathaway holds an ownership stake of 55.24 million shares of Wal-Mart Stores Inc. (NYSE:WMT) as of the end of March.
The next page of this article will discuss the insider selling observed at two other companies.