If there’s one thing I’ve learned over the last decade, it’s to follow the insiders, and sometimes the institutions. These are people who have more information than you. Therefore, let’s take a look at some of the big insider/institutional moves.
A Situation to Monitor Closely
3D Systems Corporation (NYSE:DDD) saw a 4.2% decline on Thursday when 13D filings showed that the company’s co-founder and CTO Charles Hull sold 500,000 shares on March 13. Hull now only owns 461,500 shares, and many believe he is now unloading all of his position. However, bulls have quickly rushed to his defense and have pointed out that Hull is 73 years old and that it’s very possible that he is preparing to retire.
After a 110% run higher over the last year, and a near 30% loss over the last month, some believe that the stock may be too expensive and that its growth could be slowing. At this point, it’s still hard and probably too early to tell.
With that being said, a lot of people defended Spectrum Pharmaceuticals, Inc (NASDAQ:SPPI)’ CEO Rajesh Shrotriya as he unloaded shares late last year and continuously pushed the stock lower. People pointed to his age of 68 as the reason for his selling, but as we learned earlier this week, there may have been other reasons for him taking profits. I’m not implying that 3D Systems Corporation (NYSE:DDD) and Charles Hull fall under the same category, but still, it’s worth noting and worth following.
A Long-Term Investor Finally Throws in the Towel
Ken Griffin has been trying for years to persuade E TRADE Financial Corporation (NASDAQ:ETFC) management to seek potential acquirers, and for many investors, his 10% stake in the company has been a sign of consistency and upside in a stock that has lacked both. But on Thursday the stock fell more than 8% when his firm Citadel exited their remaining stake.
Over the years, the firm has stayed very close to the company in terms of operations, and their departure means that there will no longer be someone advocating for a buyout. Furthermore, it means that we could see additional institutional investors drop their positions. Personally, this is one action that bothers me, because with E TRADE Financial Corporation (NASDAQ:ETFC) losing 70% of its value over the last five years, I have a feeling that there must have been some real problems in order for the firm to finally unload their position.
Buying When a Long Position Seems Hopeless
The $1.85 billion company Polycom Inc (NASDAQ:PLCM) saw a nice 5.71% boost on Thursday when the $7.5 billion firm Omega Advisors raised their stake in the company to 5.4%. This comes as a major sign of confidence for the company’s investors, because over the last year the stock has seen a 44% drop due to declining fundamentals.
Omega Advisors, and more specifically, the firm’s founder Leon Cooperman, has now increased its stake 70% since the end of 2012. With the stock seeing much better metrics it appears that Cooperman believes that he has found the bottom of the stock, or perhaps he believes that he has found a diamond in the rough. Either way, with such a prestigious firm taking such a large position, in a stock that appears troubled, the mere activity is worth noting.
Conclusion
In my book Taking Charge With Value Investing (McGraw-Hill, 2013), I talk about the importance of unmeasured fundamentals, including insider and institutional activity. I explain that it is always good to follow the smart money, those who may know more than yourself, and then use it as an additional point of research. Because much like an analyst’s call, you don’t want to place all of your eggs in one basket and invest solely on the actions of these individuals. However, it’s always wise to incorporate such trends as a part of your investment research, and to weigh the activity accordingly.
The article Market-Moving Institutional/Insider Moves Worth Noting originally appeared on Fool.com and is written by Brian Nichols.
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