In late July, we had reported on an insider purchase at $18 billion market cap machinery company Ingersoll-Rand PLC (NYSE:IR), which may be best known for its residential and industrial climate control systems. Now a Form 4 filed with the SEC has disclosed that a Board member, John Surma, directly purchased 1,000 shares of stock on August 1st at an average price of $61.99 per share. Our research has shown that stocks bought by multiple insiders within a short period of time tend to outperform the market on average (read our analysis of studies on consensus insider purchases). We think that this is because insiders have an incentive to diversify their wealth rather than add to company-specific risk; in order to buy shares, then, their confidence in the stock has to be strong enough to overcome this incentive.
Surma had not directly purchased any shares of Ingersoll-Rand PLC (NYSE:IR) recently. However, Gary Forsee- the insider who had been buying in late July- has made a couple good moves in the past couple years. He bought 2,500 shares in mid August 2011, when the stock was trading at $28.25- note that the stock has more than doubled in that time- and another 3,000 shares about a year ago at prices close to $45. See a history of Forsee’s insider trading activity.
In addition to insider trading activity, Insider Monkey tracks quarterly 13F filings from hundreds of hedge funds and other notable investors. These filings can be useful in developing investment strategies (for example, we’ve discovered that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year) and for researching hedge fund positions over time.
According to our database, billionaire activist investor Nelson Peltz’s Trian Partners has owned about 13 million shares of the stock since the second quarter of 2012 (find Peltz’s favorite stocks). In reaction to Peltz’s move, Ingersoll-Rand PLC (NYSE:IR) had announced a spinout of some of its assets into a pure play home security and security technologies business. It is sometimes thought that spinouts help the management of the parent company become more focused on core operations, improving profitability. D.E. Shaw, managed by billionaire D.E. Shaw, was another hedge fund with a large stake in Ingersoll-Rand PLC (NYSE:IR) at the end of Q1 (check out D.E. Shaw’s stock picks).
Revenue was up slightly at Ingersoll-Rand PLC (NYSE:IR) last quarter compared to the second quarter of 2012, but with costs higher as well pretax income was flat (reported earnings numbers were down compared to the prior year period on a higher effective tax rate).