Insiders Selling Shares of 3 Strong Performing Stocks Amid Market Turbulence

Corporate insiders can buy or sell their companies’ shares through two simple means. Firstly, they can buy or sell shares through open market transactions. Secondly, they can use the Rule 10b5-1 trading plan, which provides insiders a means to conduct scheduled transactions without worrying about any securities fraud charges. However, the Insider Monkey team tracks only the spur-of-the-moment trades and tends to avoid examining trades conducted under trading plans, and there is a straightforward reason for doing so; a recent study found that spontaneous or opportunistic trades by insiders, which simply refers to trades that are not conducted in connection with trading plans, tend to generate higher returns. Moving on to the underlying purpose of this article, our team identified three companies that registered noteworthy insider sales over the past several days. This article will examine those trades and the current state of the companies in question.

Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period, hedge funds’ top small-cap stocks beat the S&P 500 index by double digits annually (read the details here).

While the insider buying activity has been nonexistent at MarketAxess Holdings Inc. (NASDAQ:MKTX) since 2011, the insider selling activity has been gaining pace over the past several months. According to a Form 4 filing, Chief Information Officer Nicholas Themelis sold 10,683 shares on Wednesday at prices that ranged from $113.50 to $114.16 per share, trimming his total stake to 72,181 shares. The company operates an electronic trading platform for corporate bonds and other fixed-income instruments and its stock has advanced by 38% over the past 12 months, which could serve as an explanation for the high insider selling at the company. MarketAxess Holdings Inc. (NASDAQ:MKTX) primarily generates revenue from commissions, which represent a percentage of the notional dollar volume of bonds traded on the company’s platform.

The recent sale comes after MarketAxess released record financial results for fiscal year 2015. The company’s revenue for 2015 reached a record figure of $303.1 million, up by 15.3% year-over-year. At the same time, its commission revenue grew by 20.4% year-over-year to $266.2 million, while diluted earnings per share rose by 29.4% year-over-year to $2.55. In the meantime, MarketAxees trades at a whopping forward price-to-earnings multiple of 32.16, which is substantially above the average ratio of 10.0 for the Investment Banking and Brokerage industry. The current valuation seems to be too high at the moment in spite of the record financial results. A total of 15 hedge funds from our system had stakes in the company at the end of the third quarter, accumulating a mere 3% of its total outstanding shares. James Parsons’ Junto Capital Management acquired a 223,505-share stake in MarketAxess Holdings Inc. (NASDAQ:MKTX) during the third quarter.

Let’s move on to the second page of this article, where we discuss the insider sales registered at John B. Sanfilippo & Son Inc. (NASDAQ:JBSS) and LSI Industries Inc. (NASDAQ:LYTS).

John B. Sanfilippo & Son Inc. (NASDAQ:JBSS) saw several insiders unload shares this week, so let’s take a glance at each insider sale. To begin with, Director Ellen C. Taaffe discarded 1,622 shares on Tuesday at a price of $63.26 per share and currently owns 12,021 shares. Senior Vice President Frank S. Pellegrino offloaded 1,250 shares on Wednesday at $64.25 apiece, trimming his overall holding to 18,203 shares. Chief Executive Officer Jeffrey T. Sanfilippo sold 3,000 shares on Tuesday and 5,000 shares on Wednesday at a weighted average price of $63.50. The 5,000-share block was held indirectly through the Jasper and Marian Sanfilippo Family Education Trust. After the recent sale, the CEO holds a direct ownership stake of 20,991 shares. COO and President Jasper Brian Sanfilippo Jr. also jettisoned 3,000 shares on Tuesday for $63.25 each, cutting his stake to 20,991 shares. Last but not least, Director James J. Sanfilippo sold 1,622 shares on the same day at a sale price of $63.25 per share and currently owns a mere 997 shares, as revealed by a Form 4 filing.

The shares of the processor and distributor of peanuts, pecans, cashews, walnuts, almonds and other nuts are 68% in the green over the last year, after having gained 15% so far in 2016. The company reported net sales of $504.8 million for the first 26 weeks of fiscal year 2016 that ended December 24, up by 10.6% year-over-year. The increase was mainly attributable to selling price increases for most nut types (except for peanuts and walnuts) and higher sales volume. It is worth mentioning that the stock trades at a forward P/E multiple of 17.51, which is higher than the average ratio for the companies included in the S&P 500 Index, but below the forward P/E multiple of 20.0 for the Packaged Foods industry. Jim Simons’ Renaissance Technologies owns 372,100 shares of John B. Sanfilippo & Son Inc. (NASDAQ:JBSS) as of the end of the third quarter.

Let’s wrap up our discussion by looking at LSI Industries Inc. (NASDAQ:LYTS), which had one of its Directors sell a sizable block of shares earlier this week. James P. Sferra unloaded 30,000 units of common stock on Monday at prices varying from $11.01 to $11.29 per share, cutting his total stake to 249,532 shares. The Director has been gradually cutting his holding over the past several months, so let’s try to find out the possible reasons why he is doing so. The provider of corporate visual image solutions has seen its shares climb by 36% over the past year, which is a good first indicator. However, the stock is down by almost 15% thus far in 2016. Just recently, the company released its financial results for the second quarter of fiscal year 2016 that ended December 31. LSI Industries generated net sales of $170.61 million for the first six months of the fiscal year, up from $163.18 million reported for the first six months of the 2015 fiscal year. The company continues to focus on growing its sales force and developing new products and technologies, so its top-line results may keep growing in the quarters ahead. Meanwhile, the company’s operating income for the first half of fiscal year 2016 increased by 134% to $11.14 million.

Considering the company’s recent stock performance and the increased worries and uncertainty about the direction of U.S equities at the moment, the Director’s decision to offload some shares is not surprising at all. Ten hedge funds from our database were invested in LSI Industries at the end of the third quarter, amassing nearly 14% of its total shares. Royce & Associates, founded by Chuck Royce, holds a stake of 2.27 million shares of LSI Industries Inc. (NASDAQ:LYTS) as of the end of September.

Disclosure: None