Tracking insider trading activity may not be easy and insider trading metrics are not necessarily a guarantee of strong trading profits. Indeed, if executives and Board members are buying shares of their own companies, investors would do wise to take notice. Much research indicates that insider trading behavior serves as a valuable barometer of changes in sentiment and possibly future stock performance.
However, investors blindly mimicking each insider purchase may not be very successful after all, so one needs to learn how do distinguish information-rich insider buying from useless insider activity. The most important rule of thumb says that clusters of insider buying are indeed indicative of future outperformance. Of course, the number of insiders making open market purchases is highly important. Three or more insiders buying shares offer a better indication that a company’s shares are undervalued. Nonetheless, clusters of insider buying is not a common occurrence, but Insider Monkey does cover massive clusters whenever they emerge. That said, the following article will discuss several noteworthy insider transactions reported with the SEC on Tuesday.
Through extensive research, we have determined that the due diligence that the investors in our database employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also shown that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).
Struggling Bond Insurer See CEO Buy More Shares
Ambac Financial Group Inc. (NASDAQ:AMBC) has seen its most influential executive buy shares consistently over the past several months. CEO Nader Tavakoli snatched up 16,600 shares on Monday for $15.03 each and 3,400 shares on Friday at $15.28 apiece, lifting his overall holding to 254,742 shares.
The U.S. bond insurer and Mr. Tavakoli himself have been under intense pressure earlier this year, with several top shareholders calling on the CEO to step down. Canyon Capital Advisors LLC, a credit-focused hedge fund founded by Joshua Friedman and Mitchell Julis, pressured Ambac Financial Group Inc. (NASDAQ:AMBC) to accelerate the settlement of $2 billion in insurance claims and started a proxy fight against the company, which was eventually ended in mid-May. The credit-focused fund was said to have debt positions in securities issued or insured by Ambac valued at $376 million, with its equity holding in the insurer being worth roughly one-tenth of the $376 million-figure. With activist pressure being over already, Ambac Financial still has to deal with its huge exposures to the Commonwealth of Puerto Rico. The Commonwealth’s poor financial condition, weak economy and limited access to capital markets have weighted on Ambac shares. Some investors recently sued the insurer, saying Ambac misled shareholders about its public finance bond portfolio, including $2.5 billion worth of Puerto Rican debt.
There were 17 hedge fund vehicles followed by Insider Monkey with equity investments in the bond insurer at the end of March, which amassed roughly 22% of the company’s outstanding common stock. Ambac shares are 7% in the green year-to-date. William C. Martin’s Raging Capital Management was the owner of 1.10 million shares of Ambac Financial Group Inc. (NASDAQ:AMBC) on March 31.
Let’s head to the next page of this article, where we will reveal the insider buying registered at two other companies.