Cluster of Insider Buying at Clinical-Stage Vaccine Company, Massive Insider Selling at Analog Chip Giant, Plus Other Insider Trading

A number of seemingly outdated but still relevant studies on insider trading claim that corporate insiders are contrarian investors. More importantly, those studies say that insiders predict market movements better than simple contrarian strategies. One of the studies I recently stumbled upon cited an article that said: “Company executives and directors know their business more intimately than any Wall Street analyst ever would. They known when a new product is flying out of the door, when inventories are piling up, whether profit margins are expanding or whether production costs are rising.”

We always hear about the smart money – the cash invested by those considered experienced and well-informed such as hedge fund managers. But one could also argue that insider trading behavior shows where the actual smart money goes. The thinking of many investors is that there should be a way to benefit from insider trading metrics. Based on the multitude of studies on insider trading I have skimmed through in the past several months, my recommendation for investors would be to go long companies witnessing clusters of insider buying while focusing on a long-term investment horizon just like insiders do. Having said that, let’s refocus our attention towards a set of noteworthy insider transactions reported with the SEC on Thursday.

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Executive at U.S. Industrial Giant Buys Shares

One member of General Electric Company (NYSE:GE)’s management team purchased a block of shares at the beginning of the week. Jeffrey S. Bornstein, Senior Vice President and Chief Financial Officer for GE Company, bought 5,000 shares on Tuesday at a price tag of $29.63 each. Mr. Bornstein currently owns an aggregate of 68,757 shares, excluding the 38,855-share block held in his 401(k).

Earlier this year, the global digital industrial company announced plans to move most of its in-house tax staff to PricewaterhouseCoopers in a tax outsourcing-like arrangement that is unusual for big multinational companies. The timing of the arrangement appears to be ideal for General Electric Company (NYSE:GE), considering the increasing number of tax scandals facing big companies. The implementation of new transfer pricing compliance requirements across the globe – transfer pricing has been an important tool for tax avoidance (not tax evasion) for decades – will likely lead to a jump in tax scandals around the globe. General Electric’s move could protect the industrial giant against reputational risk should the company face a tax scandal similar to the one faced by Starbucks Corporation (NASDAQ:SBUX) several years ago, for instance. The Seattle-based coffee house faced a boycott in 2012 after news emerged that the company paid corporate tax in the UK only once since arriving in the region in 1998. General Electric’s shares are up by a little less than 2% in the past year. Ken Fisher’s Fisher Asset Management reported owning 31.73 million shares of General Electric Company (NYSE:GE) in its 13F for the fourth quarter.

On the next two pages of this insider trading article you’ll find a discussion concerning the fresh insider buying and selling observed at four other companies.

Cluster of Insider Buying at Clinical-Stage Vaccine Company

Let’s have a look at a cluster of insider buying at low-priced Novavax Inc. (NASDAQ:NVAX), the ideal combination sought by many investors. To start with, John J. Trizzino, Senior Vice President of Commercial Operations, purchased 3,401 shares on Tuesday at $1.12 apiece, lifting his overall holding to 88,965 shares. John A. Herrmann III, Senior Vice President, General Counsel and Corporate Secretary, snapped up 4,960 shares on the same day for $1.12 each. Mr. Herrmann owns a total of 7,072 shares after the Tuesday purchase. Last but not least, Barclay A. “Buck” Phillips, Senior Vice President, Chief Financial Officer and Treasurer, bought 1,633 shares on Tuesday, a purchase that boosted his ownership to 11,612 shares.

The clinical-stage vaccine company has seen the value of its shares plunge by 73% in the past year, mainly owing to a massive drop in mid-September when the company announced disappointing results from a late-stage clinical trial for a respiratory virus vaccine known as RSV-F. Novavax Inc. (NASDAQ:NVAX)’s lead candidate was way ahead of possible competitors from GlaxoSmithKline plc (ADR) (NYSE:GSK) and AstraZeneca plc (ADR) (NYSE:AZN), but the disappointing results delayed the company’s timeline. Nonetheless, the clinical-stage biotech recently announced the launch of a new phase II clinical trial of the product, with the results anticipated to be revealed by the third quarter of this year. The cluster of insider buying shows insiders’ confidence in the future prospects of its lead product candidate. Small-cap specialist Royce & Associates, founded by Chuck Royce, added a 900,000-share stake in Novavax Inc. (NASDAQ:NVAX) to its portfolio during the third quarter.

Massive Cluster of Insider Selling at Analog Chip Giant After Earnings Release

We can now focus our attention on the dark side of the insider trading space – insider selling. Numerous insiders at Texas Instruments Incorporated (NASDAQ:TXN) offloaded shares at the beginning of the week, so let’s have a quick look at several notable sales. To begin with, President and CEO Richard K. Templeton sold 75,725 shares on Tuesday at prices varying from $75.32 to $76.02 per share, trimming his direct ownership stake to 946,831 shares. Mr. Templeton had also offloaded a couple hundred thousand shares through freshly-exercised stock options before that. Kevin J. Ritchie, Senior Vice President of Technology and Manufacturing Group, discarded 66,667 shares on the same day at prices that fell between $75.40 and $77.51 per share, a sale that trimmed his stake to 146,705 shares. Chief Executive Officer Brian T. Crutcher sold 32,450 shares on Tuesday at an average price of $75.57 per share. Mr. Crutcher currently owns an aggregate of 243,834 shares.

The huge volume of insider selling comes after the producer of semiconductors to electronics designers and manufacturers released better-than-expected financial results for the fourth quarter. Texas Instruments Incorporated (NASDAQ:TXN)’s revenue rose by 7.1% year-over-year to $3.41 billion, reflecting strong demand for chips in automotive applications and continued improvement in demand in the industrial chip market. Meanwhile, the chipmaker’s net income climbed to $1.05 billion from $836 million recorded for the fourth quarter of 2015. Considering that the analog chip giant’s shares are trading a few dollars off their 52-week high of $79.47, the spike in insider selling does not come as a surprise. The stock has gained 48% in the past 12 months. Ray Carroll’s Breton Hill Capital added a 3,403-share position in Texas Instruments Incorporated (NASDAQ:TXN) to its pool of holdings during the December quarter.

The final page of this insider trading article discusses the fresh insider selling at two other well-known companies.

High-Ranking Executive at World’s Largest Cruise Company Offloads Shares

A top executive at Carnival plc (ADR) (NYSE:CUK) also offloaded a great deal of shares earlier this week. Michael Olaf Thamm, Chief Executive Officer of Costa Crociere – a subsidiary of Carnival, sold 41,097 shares on Tuesday at an average price of $53.04 per share. Mr. Thamm owns a total of 95,466 shares after the sale.

The largest cruise company in the world, which carries around 48% of global cruise guests, has seen its market capitalization rise by 13% in the past year. Carnival plc (ADR) (NYSE:CUK) recently reached an agreement with Italian shipbuilder Fincantieri to build two new cruise ships, designed for the company’s Holland America Line and Princess Cruises brands. The giant leisure travel company has 19 new ships scheduled to be delivered between 2017 and 2022. The company’s Board of Directors recently approved a quarterly dividend of $0.35 per share, which corresponds to an annual dividend yield of 2.58%. Marshall Wace LLP, founded by Paul Marshall and Ian Wace, owned around 93,000 shares of Carnival plc (ADR) (NYSE:CUK) at the end of September.

Chairman of Largest U.S. Health Insurer Discards Shares

One member of UnitedHealth Group Inc. (NYSE:UNH)’s board also unloaded a large pile of shares this week. Non-Executive Chairman Richard T. Burke, a director of the company since 1977, liquidated 10,000 shares on Tuesday at prices ranging from $161.57 to $161.77 per share. Mr. Burke currently owns an aggregate of 1.92 million shares after the recent transaction.

The shares of the diversified health and well-being company have gained 40% in the past year and an impressive 201% in the past five years. Although the Affordable Care Act, usually referred to as Obamacare, has succeeded at reducing the uninsured rate in the United States, it failed in achieving sustainability. One of the main reasons health insurance firms such as UnitedHealth Group Inc. (NYSE:UNH) have been abandoning the public insurance exchanges of the Affordable Care Act was that only a limited number of young, healthy individuals are signing up on these exchanges. UnitedHealth Group, the nation’s largest health insurer, plans to reduce its individual ACA plan offerings from 34 states in 2016 to a mere three this year. Eric Sprott’s Sprott Asset Management cut its stake in UnitedHealth Group Inc. (NYSE:UNH) by 48% during the fourth quarter, to around 139,000 shares.

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