According to fresh data from CNBC, the dollar value of all insider purchases in April has been the lowest in the past 11 months or so. Meanwhile, the ratio of insider selling over insider buying thus far in April has been the highest in the same 11-month period. Corporate insiders have sold 38-times more stock than they bought thus far in April, which is not particularly promising considering the long-lasting uncertainty in financial markets. The dollar volume of both insider buying and selling was even lower in the April of 2015. This rather unusual insider trading activity is fairly simple to explain, considering that April is a heavy-earnings period. Numerous stock market watchers and investors pay close attention to insider buying, as there appears to be only one reason directors and officers buy their companies’ shares on the open market: they believe those shares are undervalued. Insider Monkey processed all Form 4 filings involving insider buying submitted with the SEC on Thursday and identified three companies with noteworthy insider purchases.
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).
High-Flying Biotechnology Company Witnesses Insider Buying
Five Prime Therapeutics Inc. (NASDAQ:FPRX) had not witnessed any insider buying for quite some time until this week. Franklin M. Berger, Board member since September 2010, bought 6,090 shares on Tuesday at prices that ranged from $46.70 to $47.23 per share, lifting his ownership to 79,980 shares.
The clinical-stage biotechnology company currently has three product candidates in clinical development: FPA008, which is being studied in clinical trials as a monotherapy in joint disease called PVNS (pigmented villonodular synovitis), as well as in multiple cancers in combination with Bristol-Myers Squibb Co (NYSE:BMY)’s cancer immunotherapy drug Opdivo; FPA144, designed to treat patients with gastric cancer; and FP-1039, studied in Phase 1b clinical development to treat patients with malignant pleural mesothelioma. During the 2016 American Association for Cancer Research (AACR) Annual Meeting that took place several days ago, Five Prime Therapeutics Inc. (NASDAQ:FPRX) presented new preclinical data on FPA144. The presentation showed that FPA144 “can drive an anti-tumor response that involves multiple immune cell types”, so the company plans to evaluate this product candidate in tumors types beyond gastric cancer.
The shares of the biotechnology company have gained an impressive 100% in the past 12 months and are up 17% thus far in 2016 alone. The hedge fund sentiment towards Five Prime increased during the December quarter, with the number of money managers from our database invested in the company climbing to 23 from 20 quarter-on-quarter. Those 23 funds accumulated almost 29% of the company’s total number of outstanding shares at the end of 2015. Adage Capital Management, founded by Phillip Gross and Robert Atchinson, reported ownership of 2.33 million shares of Five Prime Therapeutics Inc. (NASDAQ:FPRX) through the round of 13Fs for the final quarter of 2015.
Let’s head to the next pages of this insider trading article, where we will discuss the insider buying registered at Performance Sports Group Ltd (NYSE:PSG) and ServisFirst Bancshares Inc. (NASDAQ:SFBS).