Corporate insiders are constantly buying and selling shares of their own companies and outside investors are wise to keep track of such trades, as directors and executives tend to have a good feel for how their companies are performing. To that end, insider buying is usually interpreted as a very positive sign by stock market watchers, which is backed up by past research, which suggests that insider purchases tend to beat broader market benchmarks by a wide margin. On the contrary, insiders can sell shares for a wide range of reasons such as tax requirements and diversification plans, so insider selling is much more difficult to interpret. The proliferation of equity-based compensation and pre-arranged trading plans has distorted insider trading data in recent years, as most insider selling is either related to freshly-exercised stock options or conducted under trading arrangements. Insider Monkey keeps track of spur-of-the-moment insider trading only, as we believe that transactions conducted under trading plans put in place several months earlier are not overly relevant to current market conditions. With that said, this article will examine several noteworthy insider transactions recorded with the SEC on Wednesday.
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 U.S. Fertilizer Maker Had Two Executives Buy Shares after Terminating a Huge Inversion Deal
CF Industries Holdings Inc. (NYSE:CF) has seen two different insiders purchase shares this week. To start with, Christopher D. Bohn, Senior Vice President of Manufacturing, purchased 12,500 shares on Tuesday at prices between $27.88 and $27.95 per share, lifting his overall holding to 31,718 shares. Moreover, Board member Robert C. Arzbaecher snapped up 17,275 shares on the same day at prices ranging from $27.94 to $28.10 per share, of which 275 shares were bought for his daughters. Mr. Arzbaecher holds a direct ownership stake of 66,843 shares following the recent purchase.
Earlier this week, the U.S manufacturer of nitrogen fertilizer and its Dutch rival OCI N.V. terminated their multi-billion-dollar merger after the U.S Treasury changed U.S. tax rules last month to hinder inversion deals. Under the agreement inked in early August, the U.S fertilizer maker was set to combine with the European, North American and global distribution businesses of OCI N.V. and become a subsidiary of a new holding company domiciled in the Netherlands. The deal could have reduced CF Industries Holdings Inc. (NYSE:CF)’s corporate tax rate from 35% to 20%. Shares of CF Industries are 27% in the red year-to-date. John Burbank’s Passport Capital owns 11.16 million shares of CF Industries Holdings Inc. (NYSE:CF) as of March 31.
Head to the next two pages of this insider trading article to see the details on several noteworthy insider transactions registered at four other companies, including the iPhone maker.