Editor’s Note: Related tickers: The J.M. Smucker Company (NYSE:SJM), Campbell Soup Company (NYSE:CPB), Kellogg Company (NYSE:K), ConAgra Foods, Inc. (NYSE:CAG), Mondelez International Inc (NASDAQ:MDLZ)
A filing with the SEC has disclosed that the wife of Timothy Smucker bought 1,000 shares of The J.M. Smucker Company (NYSE:SJM) on June 21st at an average price of $101.05 per share. Smucker is the chairman of the company’s Board of Directors- he owns over half a million shares of the company directly- and so this transaction had to be reported to the SEC as an insider purchase. We track insider purchases because these moves increase an individual’s exposure to the company, and so should signal more confidence than usual in the stock (otherwise it would be more rational to diversify). Studies do show a small outperformance effect for stocks bought by insiders (read our analysis of studies on insider trading). As such we like to briefly cover insider purchases so that investors can do further research on any interesting stocks.
The J.M. Smucker Company (NYSE:SJM)’s fiscal year ended in April 2013. The company recorded a 7% increase in sales compared to the previous fiscal year, and with margins improving its earnings grew by 18%. In fiscal Q4 the rise in net income was even stronger, but on the flipside this growth came entirely through margin improvements as sales actually fell 1%. Currently The J.M. Smucker Company (NYSE:SJM) trades at 20 times its trailing earnings; investors have been bidding up even fairly stagnant food companies into a similar valuation range, and even with analysts expecting further growth in EPS over the next two years the forward P/E is 16. Smucker is something of a defensive stock- its beta is 0.4- and while its pricing is high the company has at least shown some ability to grow its business.
We not only track insider activity but also follow quarterly 13F filings from hundreds of hedge funds as part of our work developing investment strategies; we have found, for example, that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year. Looking through our database, we see that billionaire David Harding’s Winton Capital Management disclosed ownership of about 280,000 shares of The J.M. Smucker Company (NYSE:SJM) as of the end of March (check out Harding’s stock picks).