All U.S. stock indexes closed sharply in the red on the first trading session of 2016, as concerns over China’s growth slowdown are intensifying. Furthermore, the strengthening U.S. dollar and the weakening global economic growth might have also spurred more worries into equity markets, so this is a good time to ask questions about the direction of the U.S. equities through the end of 2016. Nonetheless, certain insiders have been ignoring the broader market sell-off, which points to their confidence in the future of their companies despite facing mounting macroeconomic worries at the moment. The Insider Monkey team pinned down three companies that witnessed noteworthy insider buys in the past week or so, so this article closely examines the recent performance of the companies in question.
Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned 102% over the ensuing 38 months, outperforming the S&P 500 Index by more than 53 percentage points (read more details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
Actuant Corporation (NYSE:ATU) has registered an extremely high volume of insider buying over the past month or so. In fact, this kind of insider trading behavior is what investors should pay close attention to. To begin with, Executive Vice President and Chief Financial Officer Andrew Lampereur purchased 26,400 Class A shares this Monday and 10,000 shares on Thursday at prices ranging from $23.39 to $23.97 per share, boosting his holding to 373,458 shares. Moreover, Executive Vice President-Human Resources bought 15,000 shares on Monday and 5,000 shares on Wednesday at a weighted average cost of $23.75 and currently holds 70,415 shares. The shares of this global manufacturer of industrial products and systems are down 6% over the past one-year period, presumably owing to increasing concerns over the slowing global economy. Even though Actuant Corporation (NYSE:ATU)’s businesses offer a wide portfolio of products and services across various end markets (the company is highly-diversified), the company still has relatively weighty exposure to the energy sector and is also subject to currency exchange fluctuations. Actuant reported consolidated sales of $305 million for the first fiscal quarter, ended November 30, down by 7% year-on-year. Even so, the company reported earnings per share from continuing operations of $0.31 (excluding restructuring charges), higher than the guidance of $0.20 to $0.25 per share. Mason Hawkins’ Southeastern Asset Management added a 5.28 million-share position in Actuant Corporation (NYSE:ATU) to its portfolio during the July-to-September period.
Let’s move on to the second page of this daily insider trading article, where the insider buys reported at Atlantic Power Corp (NYSE:AT) and Sunstone Hotel Investors Inc. (NYSE:SHO) are closely scrutinized.