Insider Monkey has been monitoring insider trading activity for years and has promoted the idea that retail investors could greatly benefit by examining insider trading behavior. But why should investors keep track of insider trading metrics? Expectedly, directors and executives have a better understanding about their companies’ business operations and future prospects than any analyst and stock market participant, which makes us believe that insiders’ purchases and sales might serve as great tips for outsiders. One of the rules of thumb related to insider trading metrics is that corporate insiders purchase shares on the open market because they believe their own companies’ shares are severely undervalued. More importantly, insiders tend to act as contrarian investors, which means that their market timing involves buying low and selling high. Therefore, major shifts in insider trading behavior may suggest points of turnaround in future stock performance. That said, the following article will list several noteworthy insider trading transactions reported 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).
The Man in Charge of This Data Storage Provider Bought Some Shares This Week
Western Digital Corp (NASDAQ:WDC)’s Chief Executive Officer, Stephen D. Milligan, purchased 22,500 shares on Tuesday at a price of $45.53 per share, all of which are held by a family trust that currently owns 22,567 shares. Mr. Milligan also holds a direct ownership stake of 105,106 shares.
This insider purchase comes shortly after the manufacturer of data storage solutions issued an updated financial guidance for its fiscal fourth quarter that ends July 1, to reflect the impact of the freshly-completed acquisition of flash memory technology maker SanDisk Corporation. Western Digital Corp (NASDAQ:WDC) anticipates earnings per share of $0.90 for the fourth quarter, down from the previous guidance of $1.00 to $1.10 per share. The fourth-quarter top-line guidance was lifted to the range of $3.35 billion to $3.45 billion from the previous forecast of $2.6 billion-to-$2.7 billion. The shares of the California-based data storage provider are down 22% since the beginning of 2016. D. E. Shaw & Co. L.P., founded by David E. Shaw, owns 1.89 million shares of Western Digital Corp (NASDAQ:WDC) as of March 31.
The next two pages of this insider trading article will discuss several insider transactions registered a four other companies.