Well-known arbitrageur Ivan Boesky founded his own arbitrage fund called Ivan Boesky and Company in 1975, which sought to generate money by buying shares of companies that were going to be acquired. After Mr. Boesky made hundreds of millions of dollars, regulators found out that the well-known arbitrageur was actually trading on illegal insider information. While most people associate the term “insider trading“ with individuals like Ivan Boesky, the investment community should make a clear distinction between the “legal” and “illegal” kind of insider trading.
The legal kind of insider trading relates to perfectly legal buying or selling of common stock by executives, Board members and major shareholders who own stakes above the 10%-threshold. Although monitoring the legal kind of insider transactions may not yield astonishing returns as the ones generated by Boesky’s fraudulent scheme, numerous studies have concluded that corporate insiders are indeed better informed than other stock market participants and earn abnormal returns of up to 30% on some occasions. Hence, the usage of insider trading metrics could enable retail investors to make sound and well-informed investment decisions that can generate market-beating returns. Without further ado, let’s have a look at a list of five companies that registered noteworthy insider transactions in the past several trading sessions.
Through extensive research that covered the portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).
CEO of Struggling ETF Specialist Buys Sizeable Block of Shares
To start with, the man in charge of WisdomTree Investments Inc. (NASDAQ:WETF) made a sizable purchase of common stock this week. President and Chief Executive Officer Jonathan Laurence Steinberg purchased 100,000 shares on Wednesday at prices ranging from $10.14 to $10.30 per share. After the purchase, Mr. Steinberg holds 7.48 million shares of the company.
The New York-based exchange traded product sponsor and asset manager has seen its market cap decline by 34% since the beginning of the year. WisdomTree Investments Inc. (NASDAQ:WETF) was the ninth-largest exchange traded product sponsor in the world based on assets under management at the end of June, with AUM of $39.0 billion. The company’s disappointing stock performance has been mainly driven by strong capital outflows from its currency-hedge foreign stock ETFs, namely WisdomTree Japan Hedged Equity Fund (DXJ) and the WisdomTree Europe Hedged Equity Fund (HEDJ). Royce & Associates, founded by Chuck Royce, trimmed its position in WisdomTree Investments Inc. (NASDAQ:WETF) by 45% during the June quarter to 1.21 million shares.
The next two pages of this insider trading article will discuss another set of noteworthy insider transactions reported with the SEC on Wednesday.