Insider trading involves the buying or selling of a security by someone who has access to material non-public information about that security. Rules imposed by the U.S. Securities and Exchange Commission were designed to specifically guard against corporate insiders from unfairly profiting from material corporate information that was not public just yet. And even though most corporate insiders play by the rules imposed by the SEC when buying and selling securities of their companies, Board members and executives still have a clear edge over other stock market participants when it comes to the knowledge and understanding of their company’s business and future prospects.
A fresh study completed by several researchers from a top-tier U.S. university concluded that “opportunistic” trades by corporate insiders, trades defined as transactions that are not part of a regular pattern of trading, generate a much higher rate of return than “routine” trades. Without further ado, let’s have a look at a set of noteworthy spur-of-the-moment (i.e. non-routine) insider transactions reported with the SEC during the last trading session of the previous week.
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).
Executive at Battered Video Game Retailer Buys Some Shares Amid Weakness
According to our insider trading data, there had not been any insider buying at GameStop Corp. (NYSE:GME) since the middle of 2012 until last week. Michael K. Mauler, Executive Vice President and President of GameStop International, purchased 10,000 Class A shares on Thursday at prices ranging from $26.80 to $26.98 per share. Following the recent purchase, Mr. Mauler currently owns 120,922 Class A shares of GameStop.
The fresh insider buying comes as the shares of the world’s largest omnichannel video game retailer plunged 12% in the past month. The President of GameStop International is not the only one who views GameStop Corp. (NYSE:GME)’s shares as undervalued; analysts at Hilliard Lyons recently upgraded their rating on the company to ‘Buy’ from ‘Neutral’ with a price target of $33, saying that “valuation is a major factor in our purchase recommendation.” Moreover, Hilliard Lyons analysts “view dividends as a major component of expected total return”, as GameStop’s current dividend, which is believed to be well covered by cash flow, yields 5.46% annually. GameStop shares are 3% in the red thus far in 2016. Ken Griffin’s Citadel Advisors LLC reported ownership of 1.36 million shares of GameStop Corp. (NYSE:GME) in its 13F for the June quarter.
The next two pages of this article will discuss some other notable insider transactions reported with the SEC on Friday.