It is generally believed that insider buying and selling metrics can provide clues about companies’ future stock price direction. While a vast number of studies show that insider purchases tend to outperform broader stock market benchmarks, insider selling has not been found as informative as insider buying. This is because directors and executives can sell shares for a wide range of reasons that are not always related to their companies’ valuations or future prospects. However, just because certain studies fail to demonstrate that insider selling is indicative of future stock performance, it does not mean that insider selling is useless by any means. For instance, heavy insider selling involving three or more insiders may be telling on some occasions, as there is no reason to hold onto a stock if numerous corporate insiders are selling it. Insider Monkey examined dozens of Form 4 filings submitted with the SEC on Thursday and pinned down five companies with noteworthy insider transactions.
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 Regenerative Medicine Company Had Its CEO Buy Shares Earlier This Week
Let’s begin our discussion by having a close look at MiMedx Group Inc. (NASDAQ:MDXG)’s first insider purchase of the year. Chairman and Chief Executive Officer Parker H. Petit purchased 50,000 shares on Thursday at $6.74 apiece. After the recent purchase, Pete Petit owns 4.92 million shares of MiMedx.
The maker of regenerative biomaterial products and bioimplants has seen its market value decline 28% since the beginning of 2016, mainly due to a disappointing first-quarter earnings report. MiMedx Group Inc. (NASDAQ:MDXG) missed its first-quarter revenue projections, after enjoying a run of seven consecutive quarters of meeting or exceeding revenue guidance. The company’s total revenue increased $12.6 million or roughly 31% year-over-year to $53.4 million, mainly due to higher Wound Care sales. The primary reason behind MiMedx’s top-line shortfall was the impact of the installation of a sophisticated Sales Management System (SMS) on the company’s sales organization. Robert B. Gillam’s McKinley Capital Management acquired a 12,768-share stake in MiMedx Group Inc. (NASDAQ:MDXG) during the March quarter.
The next pages of this daily insider trading article discuss the insider transactions registered at four other companies.