Heavy insider buying usually implies that corporate insiders are bullish on their company’s future prospects, or that they find their company’s shares severely undervalued by Mr. Market. Past research finds that insider purchases tend to earn an abnormal return of more than 6% per annum, which represents a strong argument in favor of keeping track of insider buying activity. Of course, this does not mean each insider earns an abnormal return in excess of 6% each year, but the term “abnormal return” represents a strong piece of evidence that insider buying is worth monitoring.
However, retail investors monitoring insider trading behavior need to keep in mind that insiders are restricted from engaging in “short-swing” transactions, which means that insiders cannot perform opposing transactions within a six-month period (e.g. buying 10,000 shares and then selling shares within a five-day timeframe). Hence, one could arrive at the conclusion that insider trading metrics are mostly suitable for long-term-oriented investors, as Board members and executives are acting as long-term investors themselves. Insider Monkey compiles lists of noteworthy insider transactions on a daily basis, thus enabling investors and readers to find attractive investment opportunities based on insider trading metrics. Without further ado, let’s proceed to the discussion of notable insider trading activity reported with the SEC on Monday.
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Executive at Battered Qualcomm Buys Sizable Block of Shares Amid High Uncertainty
Although we discussed a minor insider purchase at QUALCOMM Inc. (NASDAQ:QCOM) last week, we thought it would be reckless to ignore a significantly larger purchase reported on Monday. Cristiano R. Amon, Executive Vice President of Qualcomm Technologies Inc. – a subsidiary of Qualcomm – and President of QCT, purchased 18,815 shares on Friday at prices varying from $53.11 to $53.15 per share. Mr. Amon currently owns an aggregate of 22,039 shares after the purchase.
The shares of QUALCOMM Inc. (NASDAQ:QCOM) have plunged by 22% in the past three months after a series of negative news events hit the airwaves regarding the company’s unfair patent licensing practices. First, the South Korean Fair Trade Commission fined the chipmaker $853 million in late-December for violating antitrust laws. The Korean antitrust regulator concluded that Qualcomm breached antitrust laws by limiting competitors’ access to its patents, as well as found that the chipmaker forced mobile-phone manufacturers into unfair license agreements by refusing to supply critical chips to the companies that wouldn’t agree to Qualcomm’s terms. Then the U.S. Federal Trade Commission started an enforcement action against Qualcomm in mid-January following an investigation of the company’s licensing practices. Last but not least, news emerged that Apple Inc. (NASDAQ:AAPL) sued Qualcomm for roughly $1 billion, alleging the chipmaker charged the iPhone maker royalties for technologies Qualcomm had “nothing to do with.” As the Wall Street Journal reported, Apple’s allegations state that Qualcomm “leveraged its monopoly position as a manufacturer of baseband chips, a critical component used in cellphones, to seek onerous, unreasonable and costly terms for patents.” After considering all that has just been said, would it make sense to follow the insider’s bullish move? Only time will tell. Ken Fisher’s Fisher Asset Management reported owning 9.69 million shares of QUALCOMM Inc. (NASDAQ:QCOM) through the round of 13F filings for the December quarter.
The next two pages of this article cover fresh insider buying and selling observed at four other companies.