Legendary Fidelity Magellan fund manager Peter Lynch once said that “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise”. This statement continues to be relevant today, which is the primary reason why Insider Monkey tracks and reports on insider trading behavior. The Insider Monkey team analyzed a series of Form 4 filings submitted with the U.S Securities and Exchange Commission on Thursday and pinpointed three companies with noteworthy insider purchases. This article will discuss the recent insider buying witnessed at the three companies in question, as well as discuss the recent performance of those companies.
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).
Let’s begin our discussion by looking into the insider buying registered at Akamai Technologies Inc. (NASDAQ:AKAM), which recently saw its most influential executive purchase shares. F. Thomson Leighton, co-founder and Chief Executive Officer of Akamai Technologies, reported purchasing a new stake of 18,126 shares on Wednesday at a weighted average price of $55.16 per share, which is held by the F. Thomson Leighton and Bonnie B. Leighton Revocable Trust. Akamai Technologies Inc. (NASDAQ:AKAM) is a provider of cloud services for delivering, optimizing and securing content and business applications over the internet. The internet infrastructure provider has seen its shares decline by 22% over the past 12 months, partly because of worries that the company’s main customers are internalizing their data center activities. Akamai’s officials mentioned during the company’s fourth-quarter earnings call that it will generate less revenue from its two largest customers in the Media Delivery Solutions business in the upcoming quarters, due to their increased in-house focus. The two media customers accounted for 13% of Akamai’s total revenue in 2015, a contribution that is anticipated to decline to about 6% in 2016.
Akamai Technologies generated revenue of $2.20 billion in 2015, which represented increases from $1.96 billion in 2014, $1.58 billion in 2013 and $1.37 billion in 2012. The company’s main pillar of growth involves the Akamai Intelligent Platform, the world’s largest cloud-based platform for securely distributing and accelerating web content, enterprise applications and video. Therefore, increased concerns over the fact that several large customers have been bringing their data center activities in-house may continue to put pressure on Akamai’s stock and financial performance. The stock is priced at 18.1-times expected earnings, above the forward P/E multiple of 15.3 for the Information Technology (IT) sector. The hedge fund sentiment towards Akamai declined in the fourth quarter of 2015, with the number of funds invested in the company dropping to 32 from 37 quarter-over-quarter. Philippe Laffont’s Coatue Management owns 2.21 million shares of Akamai Technologies Inc. (NASDAQ:AKAM) as of December 31.