Activision Blizzard Inc. (ATVI) and Two Other Companies Witness Top Executives Sell Shares

The Standard and Poor’s 500 gauge is finally trading in positive territory for 2016, after gaining approximately 12% since it reached its 2016 lows in mid-February. Given the recent rally, most investors would anticipate the volume of insider selling to keep increasing on a weekly basis, but that did not happen last week. The dollar volume of insider selling decreased quite meaningfully week-over-week, whereas the volume of insider buying more than doubled relative to the volume registered in the prior week. While it is evident why corporate insiders buy their companies’ shares, most investors and analysts believe that insider selling is not quite as informative, particularly considering the increased usage of stock-based compensation. It is true that this trend has distorted insider trading data, which makes it particularly hard to interpret insider selling activity. Nonetheless, one could interpret insider selling as a sign of fair valuation, which means that corporate insiders usually unload shares when their companies reach or approach a fair valuation. This interpretation mostly relates to the kind of insider selling that is not associated with freshly-vested stock options or pre-arranged trading plans, which we do not cover in our insider trading articles. The Insider Monkey team analyzed numerous Form 4 filings submitted with the SEC last week and pinpointed three companies with insider selling of the notable variety.

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Activision Blizzard Inc. (NASDAQ:ATVI) has seen increased insider selling activity over the past several months, which may be worrisome for investors intending to hold onto their positions in the company for a longer period of time. Eric Hirshberg, Chief Executive Officer of Activision Publishing (a subsidiary of Activision Blizzard and one of its main operating units), engaged in a number of transactions in recent weeks that may be interesting and informative for the general public. 240,000 performance-vesting restricted shares owned by the CEO of Activision Publishing vested on March 10, of which 120,852 shares were withheld to satisfy tax withholding obligations. The remaining shares were transferred to the Eric and Tara Hirshberg Revocable Trust, which had 287,847 shares following this transaction. Mr. Hirshberg sold 168,699 shares held by the trust fund last Monday at a weighted average price of $32.39, trimming the trust’s ownership to 119,148 shares. According to a separate Form 4 filing, the top executive sold the remaining 119,148 shares on the following day at prices that ranged from $32.36 to $32.51 per share. Mr. Hirshberg continues to hold a direct ownership stake of 221,163 shares.

Shares of Activision Blizzard Inc. (NASDAQ:ATVI), a developer and publisher of PC games, video games, and mobile games, have enjoyed a 193% run in the past five years, so the recent wave of insider selling at the company is not necessarily surprising. The world’s largest interactive gaming company generated total revenue of $4.66 billion in 2015, up from $4.41 billion in 2014. It should be noted that the company’s product sales, which include the sale of physical products and digital downloads, have been on a decline in recent years. However, this decline has been more than offset by higher subscription, licensing, and other revenue. Just recently, analysts at Barclays increased their price target on Activision Blizzard to $35 from $32 and reiterated their ‘Overweight’ rating on the stock, suggesting that an anticipated decline in physical sales will most likely be offset by digital revenue growth due to “significantly improved player engagement”. Barclays’ analysts believe that Activision Blizzard will enjoy higher margins from the ongoing digital transition. Cloud streaming and virtual reality are believed to represent new market opportunities for video game companies as well, including Activision Blizzard. Meanwhile, the stock is priced at around 15.5-times expected earnings, versus the forward P/E multiple of 18.2 for Electronic Arts Inc. (NASDAQ:EA) and the ratio of 17.4 for Take-Two Interactive Software Inc. (NASDAQ:TTWO). Stephen Mandel’s Lone Pine Capital upped its stake in Activision Blizzard Inc. (NASDAQ:ATVI) by 22% in the December quarter, to 11.27 million shares.

The concluding two pages of this article reveal the insider selling registered at Aqua America Inc. (NYSE:WTR) and Fidelity National Information Services (NYSE:FIS).

Aqua America Inc. (NYSE:WTR) has also witnessed strong insider selling this month, but the majority of insider sales were connected to freshly-exercised stock options. Even so, there was some spur-of-the-moment insider selling that might be informative for investors. Non-executive Chairman Nicholas DeBenedictis, who served as Chairman and Chief Executive Officer from June 1993 to July 2015, reported selling 100,531 shares last Monday at a price of $31.52 per share, of which 5,180 shares were held through his Individual Retirement Account (IRA) and 4,141 shares were held by his spouse’s IRA. After the recent sales, the Chairman continues to hold a direct ownership stake of 31,468 shares.

Aqua America operates as the holding company for regulated utilities providing water or wastewater services to approximately 3 million people in Pennsylvania, Ohio, Texas, Illinois, North Caroline, New Jersey, Indiana, and Virginia. Shares of Aqua America have advanced by 75% in the past five years, after gaining 16% in the past 12 months. This somewhat remarkable stock performance appears to explain the Chairman’s decision to unload some shares, which seems to support the “fair valuation” thesis. The company’s customer count grew by nearly 18,000 customers last year, mainly due to newly-acquired utility systems and natural growth. Aqua America’s utility customer base (excluding customers related to utility system dispositions), increased at an annual compound rate of 2.4% from 2011 through 2015. It is important to note that the U.S-based water utility has paid quarterly dividends for 71 straight years and has increased its annual dividend for 24 consecutive years. Therefore, Aqua America is on track to join the exclusive list of Dividend Aristocrats, after having increased its annual dividend payments in excess of 5% for 17 consecutive years. The company pays out an annualized dividend of $0.712 per share, which equates to a current dividend yield of 2.26%. Shares of Aqua America are currently trading at 22.2-times expected earnings, notably above the forward P/E multiple of 17.1 for the S&P 500 Index. Jim Simons’ Renaissance Technologies reported owning 1.39 million shares of Aqua America Inc. (NYSE:WTR) through the latest round of 13F filings.

Fidelity National Information Services (NYSE:FIS) had one member of its Board of Directors sell shares this past week. Director Richard N. Massey unloaded 45,000 shares on Wednesday at prices varying from $62.34 to $62.52 per share, trimming his direct ownership stake to 107,242 shares. The company’s President and Chief Executive Officer also sold sizable blocks of shares last week, but those sales were associated with freshly-exercised stock options.

Fidelity National Information Services is a provider of payment processing and banking technology to the financial sector. Shares of FIS are down by 8% in the past 12 months, partly owing to concerns over the possibility that banks might reduce spending, which would in turn lead to lower demand for the company’s technology and services. Nonetheless, some believe that the high importance of the company’s technology to the financial sector reduces the odds of it seeing downward pressure in demand for its services. In November 2015, Fidelity National Information Services completed its previously-announced acquisition of software and technology services company SunGard. The acquisition is anticipated to increase the company’s existing portfolio of solutions by adding services such as trading, securities operations, investment portfolio administration, investment asset accounting, and risk and compliance requirements management. Moreover, the freshly-completed acquisition allows the company to offer software and technology services to domestic governments, non-profits, utilities, and educational institutions. According to a recent report by Reuters, FIS is planning on selling SunGard’s business that involves serving the public sector and education markets, which points to the fact that the company is more inclined to focus on its core competence. Shares of FIS are currently trading at a forward P/E ratio of 14.5, slightly below the ratio of 15.3 for the Information Technology industry. Scott Ferguson’s Sachem Head Capital owns 3.84 million shares of Fidelity National Information Services (NYSE:FIS) as of December 31.

Disclosure: None