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Are Corporate Executives Giving Away Good Trading Opportunities With These Insider Purchases?

It seems that the U.S. stock markets have calmed down a bit and may remain this way until the Fed’s two-day policy meeting, scheduled for next week. There is a camp of Fed officials who favors raising interest rates because the labor market is improving, as well as believing that the low-rate environment might trigger financial bubbles. Meanwhile, the opposing camp believes that it is not the right time to raise rates yet, as inflation remains low and the U.S. dollar strengthens. But it appears that some corporate insiders are not worrying about whether or not the Fed will hike rates, they simply believe that their companies’ stock is undervalued. To be more specific, the Insider Monkey team identified three companies that had a large volume of insider buying yesterday and we will make an attempt to stipulate the reasons behind the insiders’ moves. These companies include Professional Diversity Network Inc (NASDAQ:IPDN), FelCor Lodging Trust Incorporated (NYSE:FCH), and Select Medical Holdings Corporation (NYSE:SEM).

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Let’s begin by looking into the insider buying activity at Professional Diversity Network Inc (NASDAQ:IPDN), which is a developer and operator of online networks that provide access to employment opportunities for diverse professionals in the United States. Jim Kirsch, Chairman and CEO of Professional Diversity Network, reported acquiring 8,000 shares for $0.85 each through a single transaction yesterday, accumulating 1.12 million shares. Similarly, the company’s CFO and VP of Finance, David Mecklenburger, also added 1,500 shares at a price of $0.75 per share earlier this week to a holding that now comprises 4,500 shares. Professional Diversity Network Inc (NASDAQ:IPDN) recently posted its financial results for the second quarter, posting revenue of $10.4 million, up from $1.0 million reported a year ago. Nevertheless, despite registering this immense revenue growth, the company’s net loss widened to $778.28 million from $488.16 million. The company’s expenses ballooned in the second quarter, offsetting the 907% year-over-year revenue growth. Therefore, it might be the case that these executives believe that their company’s stock, which by the way has lost 82% year-to-date, is set for a rebound in the months ahead. There were no hedge funds in our database with a position in Professional Diversity Network as of June 30.

We can now move on to FelCor Lodging Trust Incorporated (NYSE:FCH), which has seen its stock suffer a loss of almost 26% year-to-date. Richard A. Smith, President and CEO of FelCor, purchased 50,000 shares at $8.05 apiece on Thursday. Following the completion of the transaction, the executive currently owns 1.72 million shares. It is also worth noting that the following transaction represents the first insider buy at FelCor Lodging Trust Incorporated (NYSE:FCH) this year, which could suggest a strong future outlook for the real estate investment trust (REIT). A little more than a month ago, FelCor sold its 288-room airport-area hotel, Holiday Inn, to Sarona Orlando Lee LLC, which is a subsidiary of JHM Hotels, for $14 million. This sale surely improved the REIT’s financial position, which might in turn allow it to acquire new properties. Israel Englander’s Millennium Management boosted its stake in FelCor by 117% during the second quarter to 1.14 million shares.

Last but not least, Select Medical Holdings Corporation (NYSE:SEM)’s director, William H. Frist, bought 8,100 shares at a price of $12.32 each, boosting his stake to 164,334 shares. The company that operates specialty hospital and outpatient rehabilitation clinics in the United States had a great first half of the year, but its shares have embarked on a steady downtrend since the end of June, dropping over 15% year-to-date in the process. Even though this acquisition is not likely to put an end to the downtrend right away, it might suggest the director’s confidence in the company’s growth from current levels. A few weeks ago, Select Medical revealed its financial results for the second quarter, which did not allow the stock to achieve a turnaround. The company reported net operating revenues of $887.1 million, up by 14.8% year-over-year, while the company’s fully diluted income per share came to $0.28, compared with $0.27 reported a year ago. Finally, Select Medical expects its consolidated net operating revenues for the full year to be in the range of $3.68 billion to $3.75 billion. From the 737 hedge funds tracked by Insider Monkey, Conan Laughlin’s North Tide Capital is the most bullish on Select Medical Holdings Corporation (NYSE:SEM), holding 13.0 million shares.

Disclosure: None

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