It is commonly known that corporate insiders sell their companies’ stock for a wide array of reasons, most of which are not related to their companies’ current developments or future performance. Even so, heavy insider selling is an anxiety-provoking thought for most shareholders, so most investors would generally prefer to see insiders purchase stock rather than sell. Most companies compensate employees with stock options or shares, so they may be selling shares simply to raise capital to cover their daily expenses. Nevertheless, some insider selling activity may also be triggered by insider knowledge (although insiders are not allowed to trade on material non-public information), so tracking this type of activity should play a key role in one’s stock selection and analysis process. That being said, this article will lay out the insider sales witnessed at three companies and will also discuss the recent performance of the companies in question.
Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does besides providing high-quality articles. We also track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10.0 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. the S&P 500’s 48.7% gain) over the last 38 months (see the details here).
Cambrex Corporation (NYSE:CBM) is one of the three companies that has witnessed heavy insider selling this week. Director Ilan Kaufthal cashed out 52,315 shares on Monday at prices between $52.80 and $55.18 per share, trimming his holdings to 60,000 shares. The shares of the life sciences company are currently trading at an all-time high of nearly $53 per share, after advancing by a whopping 145% year-to-date. At the beginning of November, Cambrex Corporation (NYSE:CBM) reported gross sales of $92.35 million for the third quarter, which were up by 13.8% relative to the same period of last year, despite foreign exchange rates unfavorably impacting the company’s top-line by 5.6%. Its adjusted diluted earnings per share came to $0.40 per share, compared to $0.28 reported a year ago. The company also raised its EPS guidance for fiscal year 2015 to a range of $2.11-to-$2.19, which denotes an increase of 59%-to-65% relative to the EPS figure reported in 2014. However, the stock is trading at a relatively high trailing price-to-earnings ratio of 25.22 (the average for the S&P 500 benchmark stands at 23.18), which could somewhat justify the Director’s recent sell-off. 25 hedge funds tracked by Insider Monkey had positions in the company at the end of the third quarter, with Renaissance Technologies being among the largest equity holders of Cambrex Corporation (NYSE:CBM) among them, with 348,100 shares.