Some investors and analysts believe that the U.S. stock markets are overvalued at the moment, as they are awaiting and preparing for a bearish run. They suggest that the ultra-low-interest-rate environment has pushed U.S. equities higher, so the end of this cheap money mode will put some weight on equities. But it might take a while until the U.S. markets experience a new serious pullback; the economy has been steadily growing, the labor market has been tightening, inflation has been picking up, and consumer confidence and consumption has been increasing. Nonetheless, some companies’ insiders have started to offload their holdings lately, which might serve as reason for concern among investors. Although corporate insiders can sell shares for numerous reasons unrelated to their companies’ future prospects, investors may become more cautious when seeing heavy insider selling activity. The Insider Monkey team investigated the inside sales that cropped up in our insider trading database, and pinned down three companies with noteworthy insider selling activity. This article will discuss those insider sales and the recent performance of the companies in question.
Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does besides providing high-quality articles. We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. S&P 500’s 48.7% gain) over the last 38 months (see the details here).
Heartland Express Inc. (NASDAQ:HTLD) is one of the companies that registered a high volume of insider selling this week. Director Larry J. Gordon discarded 31,000 shares on Monday and 100,000 shares on Tuesday at prices between $17.03 and $17.34 per share, cutting his overall holding to 572,867 shares. The shares of the short-to-medium haul truckload carrier have lost nearly 35% so far this year, while their forward price-to-earnings ratio of 19.66 does not suggest too much upside in the upcoming year (the forward P/E ratio for the S&P 500 totals 17.35). The demand for freight services has been higher than industry capacity in recent years even though the demand has slightly weakened over the past few months. Heartland Express Inc. (NASDAQ:HTLD) and other companies in the industry have a hard time finding qualified drivers, as drivers’ availability has been impacted by numerous regulations. Fuel expenses, which accounted for roughly 17% of Heartland’s operating revenues, represent the company’s highest cost after salaries, wages and benefits to drivers and other employees; hence, the company has greatly benefited from lower diesel fuel prices in 2015. Nonetheless, Heartland Express reported operating revenues of $561.7 million for the first nine months of 2015, down from $668.4 million reported for the same period a year ago. This decrease was primarily attributable to a decrease in drivers. Meanwhile, its basic net income per share declined to $0.64 from $0.72 year-on-year. Ken Fisher’s Fisher Asset Management cut its position in Heartland Express Inc. (NASDAQ:HTLD) by 3% during the July-to-September period to 2.32 million shares.