The dollar volume of both insider buying and selling increased last week relative to the volume recorded for the previous trading week. The ratio of insider buying to selling shows that corporate insiders sold nearly 26 times more stock than they bought this past week, which isn’t necessarily promising for the investment community. However, retail investors closely following insider trading metrics should be aware that directors and executives usually sell much more stock than they buy, thanks to the increased usage of equity-based compensation packages. Insider Monkey processed numerous Form 4 filings submitted with the SEC on Friday and pinpointed two companies with relatively noteworthy insider buying, as well as three companies with notable 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).
One Board Member of This Drive-In Restaurant Chain Bought Shares Last Week
Sonic Corporation (NASDAQ:SONC) had not seen much insider trading activity on the buy side in the past few years until last week. Board member Kathy L. Taylor purchased 10,000 shares on Wednesday at prices varying from $29.84 to $29.85 per share, all of which are held by a trust fund that currently owns 38,870 shares. Ms. Taylor also holds a direct ownership stake of 1,358 shares.
The shares of the Oklahoma-based quick serve restaurant chain have dropped by 13% in the past month, after the company warned investors that same-store sales for the third quarter of fiscal 2016 that ends March 31 would be lower than previously anticipated. Sonic Corporation (NASDAQ:SONC) anticipates fiscal third-quarter comparable sales to be positive, but below its guidance of 4%-to-6%, citing “slower industry traffic and modestly unfavorable weather during the quarter”. The shares of the drive-in restaurant chain are 5% in the red year-to-date. Richard Chilton’s Chilton Investment Company owns 3.52 million shares of Sonic Corporation (NASDAQ:SONC) as of the end of March.
The next two pages of this insider trading article will discuss several noteworthy insider transactions recorded at four other companies.