One Theatre Chain and Two Finance-related Companies Witness Insider Trading Activity on Buy Side

As a general rule, strong insider buying is usually interpreted as a sign of future stock appreciation. If corporate insiders are spending their hard-earned capital to buy their own company’s stock, this implies that insiders believe that the public is not valuing that stock appropriately. There are a number of funds that invest in equities solely based on insider behavior, which, however, have not outperformed broader market benchmarks in recent years. Catalyst Capital Advisors LLC’s mutual fund lineup includes the Catalyst Insider Long/Short Fund, which purchases stocks with insider buying and shorting stocks with insider selling. The fund has slightly underperformed the S&P 500 gauge in the past three years, presumably because of its short-selling bets (the fund outperformed the benchmark in the first two months of 2016). Insiders can sell shares for a wide variety of reasons that might not be necessarily related to their companies’ developments or future prospects, so investors should analyze insider selling solely as part of a broader analysis process. However, corporate insiders’ purchases tend to beat benchmarks by a wide margin, which is why Insider Monkey pays close attention to this type of activity. Having this in mind, the following article will discuss the insider buying activity observed at three companies, as well as analyze the recent performance of the companies in question.

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).

AMC Entertainment Holdings Inc. (NYSE:AMC) saw its freshly-assigned President and Chief Executive Officer purchase a sizable block of shares this week. Adam M. Aron, CEO of AMC Entertainment, bought a new stake of 10,000 Class A shares on Monday at prices that ranged from $28.77 to $28.90 per share. The recent purchase of the newly-appointed CEO can be interpreted as a sign of commitment to the new role, showing that his interests are aligned with shareholders’ interests. In early March, the second-largest U.S. theater chain, controlled by Chinese private conglomerate Dalian Wanda Group Co., announced an agreement to purchase U.S. leader in digital cinema, 3D cinema deployments and alternative programming Carmike Cinemas Inc. (NASDAQ:CKEC) for $30.00 per share in cash. Although Carmike’s Board of Directors voiced its decision that AMC’s offer was in the best interest of the target’s shareholders, Mittleman Brothers LLC, the largest shareholder of Carmike Cinemas, opposes the deal. “We intend to vote against, and to encourage other shareholders to vote against the merger agreement”, said Mittleman Brothers in a public filing with the SEC. According to this shareholder, the offer of $30 per share is extremely low, suggesting that a $40 offer would be more appropriate. Carmike Cinemas currently operates 276 theaters and 2,954 screens in 42 states across the nation, with a particular focus on mid-sized communities. Meanwhile, AMC Entertainment Holdings Inc. (NYSE:AMC) owns, operates and has interests in 387 theatres and 5,426 screens as of December 31. The company’s total revenues (mainly derived from box office admissions and theatre food and beverage sales) for 2015 totaled $2.95 billion, up from $2.70 billion in 2014. Shares of AMC are up 18% since the beginning of 2016 and trade at a forward P/E multiple of 18.3, which is notably above the ratio of 14.2 for the Movies and Entertainment industry. The hedge fund sentiment towards AMC declined in the December quarter, with the number of funds invested in the company dropping to 16 from 20 quarter-on-quarter. Jim Simons’ Renaissance Technologies upped its stake in AMC Entertainment Holdings Inc. (NYSE:AMC) by 23% in the fourth quarter to 342,500 shares.

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The next page of this insider trading article discusses the insider buying activity registered at Gain Capital Holdings Inc. (NYSE:GCAP) and BCB Bancorp Inc. (NASDAQ:BCBP).

Gain Capital Holdings Inc. (NYSE:GCAP) had not seen any insider buying for quite a while until last week. Peter Quick, Chairman of the company’s Board of Directors, purchased 60,000 units of common stock on Friday at prices varying from $6.89 to $7.14 per share, of which 10,000 shares are held through his Individual Retirement Account (IRA) and 20,000 shares are held by Family LLC. After the recent sizable purchase, the Chairman holds a direct ownership stake of 109,525 shares.

Gain Capital Holdings is a provider of trading services and solutions, with a special focus on over-the-counter (OTC) and exchange-traded markets. Just recently, the company completed the restatement of its financial statements for years ending December 31, 2014 and 2013, after finding errors related to the company’s approach in treating certain intercompany payables and receivables among its subsidiaries for accounting and tax purposes. Gain Capital Holdings generates the majority of its revenue from the retail segment, which involves trading revenue earned from the bid/offer spreads, commission revenues from the company’s sales trader and advisory businesses, and inactivity fees and interest revenue. The company’s net revenue for 2015 totaled $435.3 million, up from $369.2 million in 2014 and $267.7 million in 2013. The global provider of online trading services has seen its shares decline 33% in the past 52 weeks, after having lost 21% so far in 2016. Shares of Gain Capital Holdings are currently trading 4.6-times expected earnings, significantly below the forward P/E multiple of 10.3 for the Investment Banking and Brokerage industry. The number of hedge funds from our system with stakes in the company declined to 11 from 17 during the December quarter, amassing 13% of its outstanding common stock. Richard Mashaal’s Rima Senvest Management reported ownership of 4.56 million shares in Gain Capital Holdings Inc. (NYSE:GCAP) in its 13F for the fourth quarter.

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The insider buying activity at BCB Bancorp Inc. (NASDAQ:BCBP) has been relatively high in March, with four different insiders purchasing shares since the beginning of the month. According to a freshly-amended Form 4 filing, General Counsel John J. Brogan purchased 10,000 shares on Thursday for $10.07 each, boosting his overall holding to 73,556 shares. Moreover, Director Spencer B. Robbins bought 3,681 shares last Tuesday at $9.9 apiece and 1,930 shares on Thursday for $9.97 each, which lifted his direct ownership stake to 28,361 shares. The Director also holds an indirect ownership stake of 1,650 shares through his Individual Retirement Account (IRA).

BCB Bancorp is the holding company parent of community-oriented financial institution BCB Community Bank. The company’s total assets increased $317.0 million or 24.3% during 2015 to $1.62 billion, mainly due to an increase in net loans receivable of $212.3 million. BCB Bancorp’s net income for 2015 totaled $7.0 million, down from $7.6 million reported for 2014. The decrease was mainly driven by higher non-interest expenses, which were partially offset by higher net interest income and non-interest income. What’s more, the company’s net interest income grew $3.6 million or 7.3% year-on-year to $53.5 million, primarily as a result of an increase in the average balance of interest-earning assets. This increase was partly offset by a lower average yield on interest-earning assets of 38 basis points to 4.68%. Shares of BCB Bancorp have declined 16% over the past 52 weeks and are down 3% year-to-date. Both short and long term-oriented investors should bear in mind the low liquidity associated with a possible investment in this company. Jim Simons’ Renaissance Technologies LLC acquired a new stake of 18,158 shares in BCB Bancorp Inc. (NASDAQ:BCBP) during the December quarter.

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