Recent studies (read about them) show that insider purchases can be usually interpreted as bullish signals. Wonder why? Well, we believe that insiders face a strong incentive to diversify their wealth away from the company they work in – and therefore reduce their risk. The fact that they ignore the benefits of diversification and buy the stock anyway can be interpreted as a signal of high confidence in the company. This is why, in addition to using hedge fund filings to develop investing strategies, we also maintain a database of insider purchases and take a brief look at significant insider buys to help investors decide if the company is worth further research. Thus, in this article, I will look into five interesting insider purchases that occurred since the start of 2014.
The first transaction I would like to refer to occurred on Jan. 2nd. On the first working day of the year, Michael Dailey, Board Director at Zix Corporation (NASDAQ:ZIXI) acquired 597 shares of the company’s Common Stock. He paid $4.50 per share, and now owns 12,597 shares. Although a bet as small as his last one does not inspire the largest of confidences in the company, you should note that Dailey has been consistently adding shares to his holding every month since May of 2013, when he started a position in the stock.
The day after – Jan. 3rd– Robert Mcdonald, Board Director at United States Steel Corporation (NYSE:X) started a position in the company’s stock. Through four different transactions, he procured a total of 2,000 shares of the company. He paid $29.838 for the first 100 shares, $29.8378 for each of the following 200, and $29.8365 each, for an extra 800 shares. In addition, he got 1,000 shares of Common Stock under the terms of the company’s Non-Employee Director Stock Plan.
Insider activity at United States Steel Corporation (NYSE:X) did not stop there, however. Last week, on Jan. 15th, at least 11 board directors bought stock from the company at $29.50 per share. Although the nature of these transactions was not specified at the SEC filings, which means we cannot know if they were a part of some kind of director compensation plan (or something similar), the fact that almost a dozen insiders are betting on the company´s growth cannot be a bad sign, especially as they all paid full-price for the stock, and bough, at least, 3,300 shares each. Even though the outlook for the general steel industry looks complicated in the U.S., analysts expect United States Steel Corporation (NYSE:X) to outperform its competitors over the long-term, so their bets do not seem unwise.
On the second week of 2014, on Monday, Jan. 6th, Anne-Marie Ainsworth, President, Chief Executive Officer and Board Director at Oiltanking Partners LP (NYSE:OILT) filed a Form 4 report with the U.S. Securities and Exchange Commission, declaring a purchase* of the company’s stock. The insider acquired 1,000 shares at prices ranging from $62.20 to $62.46 per common unit (the weighted average price was of $62.37 per share). She now owns 13,000 shares of Oiltanking Partners LP (NYSE:OILT), worth more than $800,000 at the current stock price.
I should highlight that Ainsworth’s last purchase is not the first one this year. Au contraire, she entered a unit purchase plan, which meant that she started increasing her participation in the company every month since Feb. 2013, augmenting her holdings by more than 10,000 shares. Another insider betting on the company is David Griffis, Board Director, who entered this plan even earlier, in Jan. 2012, and has been increasing his position in the stock ever since.
This year´s third week also registered some interesting insider moves. On Wednesday, Jan. 15th, Robert Knapp, Board Director at MVC Capital, Inc. (NYSE:MVC), added 31,006 shares to his holdings, having paid a price of $13.77 per share. On Thursday, Jan. 16th, he –once again- purchased the company’s stock. In this occasion he bought 4,876 shares at a price of $13.87 per share. After the reported transactions, he owns 35,882 shares, indirectly, through a separately managed account and a private fund in which Mr. Knapp is a Principal. In addition, he holds 300,765.37 shares through Ironsides Holdings LLC, which is fully-owned by him.
And not only did Mr. Knapp increase his bet on MVC Capital, Inc. (NYSE:MVC) last week. Another insider that seems to see value in this stock is W Bruce Shewmaker, Managing Director, who added 500 shares to his holdings last Thursday.** He now owns 22,865.72 shares of common stock.
Finally, on Jan. 17th, Brent Smolik, President, Chief Executive Officer and Chairman at EP Energy Corp (NYSE:EPE) also filed a Form 4 report at the U.S. Securities and Exchange Commission, declaring a purchase of the company’s stock. The insider acquired his first 100 shares for $19.9 per common unit at the company’s initial public offering (IPO). In addition, he indirectly owns 375,320 shares through EPE Management Investors, LLC.
*“The transaction reported on this Form 4 was executed pursuant to a unit purchase plan in compliance with Rule 10b5-1 under the Securities Exchange Act of 1934” (Sec.gov).
** Mr. Shewmaker reported several transactions, both purchases and sales, on this date, but the final balance was an increase in his position by 500 shares. He paid about $13.83 per share.
Disclosure: Javier Hasse holds no position in any stocks mentioned
