There are various reasons why corporate insiders might sell shares of their own companies. For instance, they may seek to diversify their holdings, buy a new house, or take an expensive vacation, which makes it practically impossible to know the actual reason behind any particular insider sale. Therefore, securities sales conducted by insiders are not as powerful of indicators as insider purchases. However, directors and executives are financially-educated individuals, so they also would not be as likely to sell shares if they anticipated positive catalysts that could drive their companies’ share price up in the near-term. Therefore, heavy insider selling, particularly in the form of clusters of selling, may serve as an indicator that insiders believe their company’s share price is approaching or exceeding a “fair” value. Insider Monkey processed the majority of Form 4 filings submitted with the SEC this week and identified three companies with noteworthy insider selling.
Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).
This Truckload Carrier’s CEO Unloaded Multiple Blocks of Shares in the Past Week
Let’s get underway by analyzing the fresh insider selling witnessed at Marten Transport Ltd (NASDAQ:MRTN). The trucking company’s Chairman and Chief Executive Officer, Randolph L. Marten, discarded 8,860 shares last Tuesday, 31,140 shares last Wednesday, and 20,000 shares on Thursday at prices that ranged from $19.00 to $19.43 per share. Mr. Marten currently owns a direct ownership stake of 7.29 million shares.
The U.S. temperature-sensitive truckload carrier, which specializes in transporting food and other consumer packaged goods that necessitate a temperature-controlled environment, has seen its shares advance by 5% since the beginning of the year. However, Marten Transport Ltd (NASDAQ:MRTN)’s stock performance has been weighed on by a recent report released by analysts at Stifel Inc. that targeted the entire truckload industry. Specifically, the analysts suggested that pricing for long-haul trucking services will continue to be weak through the end of the year, saying that “pricing pressure is rampant in the generic freight market”. Marten Transport was one of four operators downgraded by Stifel, with our main subject of discussion being downgraded to ‘Hold’ from ‘Buy’. The shares of most trucking companies, including Marten Transport, have embarked on an uptrend since mid-January, as retailers showed signs of renewed restocking after the holiday shopping season. However, various analysts and research hubs said that capacity in the truckload industry continued to be abundant, which usually gives shipping customers more leverage over truckload companies.
Marten Transport’s shares are priced at 15.6-times expected earnings, compared to the forward P/E ratios of 15.4 for USA Truck Inc. (NASDAQ:USAK), 16.1 for Hub Group Inc. (NASDAQ:HUBG), and 18.0 for Knight Transportation (NYSE:KNX). Cristan Blackman’s Empirical Capital Partners acquired a new stake of nearly 428,000 shares of Marten Transport Ltd (NASDAQ:MRTN) during the final quarter of 2015.