Among all the insider buying and selling activity yesterday, we identified three companies which had a large volume of insider purchases in terms of monetary value, either by one or more insiders of the companies in question. Those companies were Biogen Inc (NASDAQ:BIIB), Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG), and FS Investment Corporation (NYSE:FSIC). We track insider moves, particularly purchases, because of the past research conducted on the topic which showed a correlation between insider purchases and greater short-term stock returns.
We’ll also take a look at the hedge fund activity in these stocks. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 123% and beating the market by more than 66 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
Let’s start with Biogen Inc (NASDAQ:BIIB), likely the most intriguing of the trio of companies. Director Stelios Papadopoulos made two purchases of 5,000 shares each yesterday, at an average price of $304.88, amounting to just under $3.05 million spent purchasing shares. The purchases signal a vote of confidence in the company by the Director in the first trading day following shares getting pummeled on Friday to the tune of their worst intraday trading loss in seven years, as they shed $85 per share, or over 21% of their value. The implosion followed an underwhelming earnings report, in which revenue came up light, while the company also lowered its guidance for the remainder of the fiscal year. We felt the reaction was overdone and recommended buying shares on their weakness and Papadopoulos was clearly thinking along the same lines, being the first insider at Biogen Inc (NASDAQ:BIIB) in nearly five years to buy shares. Shares have rebounded by over 3% in trading today. Smart money was bullish on Biogen heading into the second quarter, with 64 hedge funds tracked by Insider Monkey holding long positions in the stock, up from 57 three months earlier. The total value of their holdings also jumped to $3.41 billion from $2.77 billion during the same period. Samuel Isaly‘s healthcare fund Orbimed Advisors was the most bullish of those, holding 1.21 million shares worth over $509 million at the end of the first quarter.
Let’s move on to FS Investment Corporation (NYSE:FSIC), which has had a wealth of investments made in its stock by insiders not only yesterday, but throughout 2015. In total, there have been 23 insider purchases of the company’s stock this year, while not a single insider has sold shares. The latest purchases were made by Director David Adelman and by CEO Michael Forman. The former purchased 16,450 shares at a cost of $9.75 each, while the latter made two purchases, of 5.080 shares at $9.77 each, and of 16,450 shares at $9.75 each. In total, the two insiders purchased $370,406.60 worth of shares. FS Investment Corporation (NYSE:FSIC) has rebounded by nearly 10% from its mid-January low of $9.19, but has suffered two noticeable dips since, the most recent coming last week, when it shed 5% during the trading week. The investment company pays out a dividend of $0.22 quarterly for a yield of 8.91%.
Smart money was slightly bearish on FS Investment Corporation during the first quarter of the year, with fund ownership dipping to five from six during the quarter, and the value of their holdings sliding by over 20% to $8.24 million, despite the stock actually appreciating slightly during the period. ClearBridge Investments, managed by Sam Peters, which now contains the former Legg Mason Capital Management, had the largest stake in the company among those funds on March 31, holding just under 4.54 million shares. Israel Englander’s Millennium Management and Peter Muller’s PDT Partners also held positions in the company. Springbok Capital and Two Sigma Advisors sold off their positions in the company during the quarter.
Lastly is Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG), in which four different insiders made purchases at varying prices yesterday. Director Ian Carter purchased 13,750 shares at $14.49 per share, CEO Mark Mednansky purchased 5,000 shares at an average sticker price of $14.40, CFO Thomas Pennison purchased 6,850 shares at a $14.47 average selling price, and Director David Barr bought 3,500 shares at $14.13 each. In total, the insiders’ share purchases totaled $419,812. The sign of strength from management and the decision to invest back in their company comes shortly after shares fell heavily on July 23 following the restaurant holding company’s second quarter financial results. The company missed consensus estimates on both its revenue and earnings fronts, and same-store sales fell notably at two of the holding company’s three restaurants, including by 6.3% at Del Frisco’s Grille. Nonetheless, management expects overall same-store sales across the three brands to increase slightly this fiscal year.
The smart money was in alignment with insiders, as it was bullish on the company and its eateries in the first quarter. Hedge funds with positions in the company rose by seven to 21, while their aggregate holdings jumped to $96.50 million from $66.33 million, and that during a time in which the stock lost about 15% of its value, so the smart money was clearly behind the company. Leading the pack was Gabriel Plotkin‘s Melvin Capital Management, which held just under 1.18 million shares. Their faith has been incorrectly placed in this instance, as shares traded steadily downwards after April passed and are down by 25% since the end of the first quarter.
Disclosure: None
