All major U.S. indexes declined sharply on Friday, delivering the worst trading week since the major sell-off in August. Even so, the volume of insider buying increased significantly last week relative to the previous one, which may be taken as a bullish sign amid so much uncertainty. At the same time, last week’s insider selling activity more than doubled compared to the prior week. In fact, insider selling has been more prominent than insider buying over the past several months, which could make many market participants believe that insiders have a bearish view of the market. The Insider Monkey team pinpointed three companies that had a high volume of insider selling last week, so this article will lay out recent developments at those companies which might have propelled insiders to discard their holdings.
Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does besides providing high-quality articles. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
Let’s start off by looking into the insider selling activity at independent natural gas and oil company PDC Energy Inc. (NASDAQ:PDCE). Director James M. Trimble unloaded 33,582 shares last Tuesday at a weighted average sale price of $60.70, cutting his overall holdings to 168,031 shares. The shares of the company are 42% in the green year-to-date, which is somewhat surprising considering the challenging environment in the energy industry. The company’s third quarter production grew by 84% year-over-year to 4.3 million barrels of oil equivalent (MMBoe), which marks the strongest quarter-over-quarter production growth at the company ever. PDC Energy employs numerous derivative instruments to help tackle the volatile crude and natural gas prices, which assisted the company in keeping its operations pumping at full steam. The company generated net cash from operating activities of $136.5 million during the third quarter, which was up by 94% year-over-year and exceeded its capital expenditures of $130.9 million. The number of smart money investors that we track which had positions in the energy company declined to 27 from 29 during the third quarter, with them accumulating 13.60% of the company’s outstanding common stock. Jorge Paulo Lemann’s 3G Capital acquired a 300,000-share stake in PDC Energy Inc. (NASDAQ:PDCE) during the June quarter.