Numerous studies conclude that corporate insiders earn significant abnormal profits by trading the securities of their own companies. Interestingly enough, insider trading studies also show that even uninformed outsiders can generate abnormal profits by simply imitating insiders. So is it worth tracking insider trading metrics? Of course it’s worth it!
Although some believe corporate insiders trade on privileged information that is not publicly available, a practice viewed as an unfair and illegal advantage, most corporate insiders usually play by the rules imposed by the SEC when buying and selling shares of their own companies. However, stock market participants should keep in mind that there is an insider trading act that is practically impossible to detect: not trading securities because of insider information. For instance, an insider is considering selling 10,000 shares of his own company, but he quickly finds out that the company is about to receive a buyout offer from another company. The SEC and other stock market participants have no knowledge of the insider’s intent, so he can easily hold onto his 10,000 shares until the offer is made public. Hence, if corporate insiders are selling shares at a rapid pace, it might imply that major positive announcements or events are not anticipated in the short-term future. That said, let’s have a look at a set of noteworthy insider transactions reported with the SEC on Tuesday.
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Board Member at Struggling Operator of Discount Variety Stores Buys Shares After Plunge
One member of Dollar Tree Inc. (NASDAQ:DLTR)’s Board of Directors purchased some shares earlier this week, soon after the nation’s two biggest dollar-store chains released disappointing financial results. Independent Director Conrad M. Hall snapped up 5,000 shares on Monday for $85.60 each, with all these shares being held in a grantor retained annuity trust that currently owns 55,000 shares. Mr. Hall also owns a direct ownership stake of around 20,875 shares.
Dollar Tree Inc. (NASDAQ:DLTR), a leading operator of discount variety stores offering merchandise at the fixed price of $1.00, has seen its market capitalization plunge by 13% in the past month, reflecting disappointing results for its second fiscal quarter that ended July 30. Soon after releasing the earnings report, analysts at MKM Partners slashed their rating on Dollar Tree to ‘Neutral’ from ‘Buy’ and cut their price target on the stock to $80 from $140, arguing that the anticipate “the downshift at Dollar Tree, which could continue, and a more challenging outlook for Family Dollar, to limit valuation on a stock that has enjoyed one of the highest multiples in retail.” Ken Griffin’s Citadel Advisors LLC upped its position in Dollar Tree Inc. (NASDAQ:DLTR) by 52% during the June quarter to 2.42 million shares.
The second page of this article will disclose two companies with fresh noteworthy insider buying, whereas the final page of the article will discuss fresh insider selling registered at two other companies.