Cluster of Insider Buying at Inovalon Holdings Inc. (INOV) after Slashing Guidance, Plus Other Noteworthy Pre-Holiday Insider Transactions

Corporate insiders such as Board members and executives usually buy shares on the open market for one simple reason – they believe Mr. Market severely undervalues their companies’ shares. Moreover, past research concludes that the so-called insider trading anomaly is more prevalent in small-cap companies, which means corporate insiders at small firms tend to trade more profitably than insiders at large companies.

The phenomenon could be explained by the fact that most investors and brokers have only a limited interest in small-cap companies, so there is very limited research on small caps. Therefore, the difference between what corporate insiders at small-cap companies and outsiders know about prospects and business fundamentals tends to be quite pronounced. Although the insider trading anomaly is not only limited to small and unpopular stocks, the following article will discuss recent insider trading witnessed at one low-priced publicly traded company and other unpopular publicly traded companies, as well as renown companies such as Abbott Laboratories (NYSE:ABT).

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Massive Cluster of Insider Buying at Inovalon Holdings After Slashing Full-Year Guidance

Let’s begin our discussion by analyzing a cluster of insider buying observed at Inovalon Holdings Inc. (NASDAQ:INOV). To start with, Board member William J. Teuber Jr. purchased 26,000 Class A shares on December 16 at $9.25 apiece, lifting his overall holding to 95,559 shares. President Robert A. Wychulis snapped up 1,675 Class A shares on the same day at prices varying from $9.28 to 9.30 per share. After the not-so-distant purchase, Mr. Wychulis currently owns an aggregate of 32,942 shares. Board member Andre Hoffmann bought 200,000 units of common stock on December 16 at prices that fell between $9.17 and $9.40 per unit, a purchase that boosted his ownership stake to 309,559 units. William D. Green, who joined the company’s Board of Directors in August 2016, added 30,000 Class A shares to his portfolio, which currently comprises 68,351 shares. The block of shares was acquired on December 16 at a weighted average price of $9.29 per share. Last but certainly not least, CEO and Chairman Keith R. Dunleavy bought 100,000 Class A shares on December 14 at prices ranging from $9.10 to $9.25 per share, after which Dr. Dunleavy owns 180,000 shares.

The massive cluster of insider buying comes shortly after the provider of cloud-based analytics solutions for the healthcare industry reduced its full-year guidance, as the company was unable to enter into an expected collaboration agreement as a result of “unforeseen circumstances impacting the counter-party.” Inovalon Holdings Inc. (NASDAQ:INOV)’s shares have plunged by 38% over the past month, with the stock being down 42% year-to-date. Paul Tudor Jones’ Tudor Investment Corp had 22,595 Class A shares of Inovalon Holdings Inc. (NASDAQ:INOV) in its portfolio at the end of September.

The next two pages of this insider trading article will digest more insider transactions recently reported with the SEC.

Executive at Well-Known Health Care Company Buys Some Shares

One member of Abbott Laboratories (NYSE:ABT)’s executive team purchased some shares prior to the start of the holiday season. Brian J. Blaser, Executive Vice President of Diagnostic Products at Abbott since early June 2012, purchased 15,580 shares on December 20 through multiple transactions at prices varying from $38.43 to $38.46 per share. Following these transactions, Mr. Blaser currently holds an ownership stake of 145,062 shares.

In late April 2016, Abbott Laboratories (NYSE:ABT) agreed to acquire medical device manufacturer St. Jude Medical Inc. (NYSE:STJ), a deal U.S. antitrust enforcers are set to approve in the near-term future. According to a fresh report from Reuters, the approval from the U.S. Federal Trade Commission could come later this week. Under the terms of the agreement inked in April, St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 of Abbott shares at closing. European antitrust enforcers approved the deal in November on the condition that the soon-to-be merged company divests two devices used for cardiovascular treatments. Abbott shares are 14% in the red thus far in 2016. Ric Dillon’s Diamond Hill Capital was the owner of 11.88 million shares of Abbott Laboratories (NYSE:ABT) at the end of the third quarter.

Cluster of Buying at Low-Priced Manufacturer of Vehicle Emissions Control Products

Three corporate insiders, including the most well-informed and influential executives, at Clean Diesel Technologies Inc. (NASDAQ:CDTI) bought shares in December. To begin with, CEO Matthew Beale purchased 12,500 shares on December 16 at a price of $2.00 per share – a purchase that increased his ownership to 87,188 shares. Board member Lon E. Bell acquired 250,000 units of common stock on the same day for $2.00 each, boosting his holding to 590,494 units. Tracy A. Kern, Chief Financial Officer and Secretary, bought a new stake of 10,000 shares on December 16 at $2.00 apiece.

Clean Diesel Technologies Inc. (NASDAQ:CDTI), which manufactures and distributes vehicle emissions control products, has seen the value of its shares decline by 55% since the start of the year. The provider of advanced materials technology for emission controls applications has implemented a series of initiatives to improve its financial foundation since late last year, with the company having successfully streamlined operations, reduced the fixed cost base and eliminated $8.9 million in debt in August. Jim Simons’ Renaissance Technologies LLC reported owning 17,174 shares of Clean Diesel Technologies Inc. (NASDAQ:CDTI) through the latest round of 13Fs.

The final page of this article will discuss recent insider selling witnessed at two other companies.

Insiders at Luxury Hotel REIT Sell Shares

Several insiders at Host Hotels and Resorts Inc. (NYSE:HST) offloaded shares over the course of this month. Brian G. MacNamara, Senior Vice President and Corporate Controller, discarded 8,427 shares on December 21 at a price of $19.38 per share, cutting his overall holding to 45,745 shares. Joanne G. Hamilton, Executive Vice President of Human Resources, sold 20,000 shares on December 16 at $19.01 apiece. Following the recent sale, Ms. Hamilton currently owns 27,893 shares.

The self-managed real estate investment trust, whose portfolio primarily consists of luxury and upper upscale hotels, has seen its market capitalization rise by 23% since the beginning of the year. Host Hotels and Resorts Inc. (NYSE:HST)’s revenue per available room increased by 3.8% for the third quarter, reflecting a 120 basis points increase in occupancy and a 2.2% increase in average room rate. Strong results at the company’s international properties, as well as the shift in holidays to the fourth quarter, resulted in improvements in both rate and occupancy. Nonetheless, a continued slowdown in corporate transient demand, predominantly due to weakening business investments, reduced corporate profits and global political and economic uncertainty, somewhat limited the increase in both occupancy and rate. There were 17 hedge funds from our system invested in Host Hotels and Resorts at the end of the third quarter, up from 14 invested at the end of the second quarter. George Hall’s Clinton Group added a 1.01 million-share stake in Host Hotels and Resorts Inc. (NYSE:HST) to its pool of holdings during the third quarter.

CEO of TV-Station Operator and Digital-Media Company Unloads Shares

The person in charge of Tegna Inc. (NYSE:TGNA) offloaded a sizeable block of shares earlier this month. President and CEO Gracia C. Martore sold 140,179 shares on December 20 at prices varying from $22.07 to $22.51 per share. Ms. Martore currently owns an aggregate of 30,034 shares following the recent sale.

The shares of the TV-station operator and digital-media company are down 13% thus far in 2016. Tegna Inc. (NYSE:TGNA)’s portfolio of media and digital businesses comprises one of the largest, most geographically diverse broadcasters in the United States and two leading digital companies, Cars.com and CareerBuilder. In early September, the company announced plans to spin-off its Cars.com business unit, which generated annual revenue of around $597 million in 2015. The planned separation will be implemented via a tax-free distribution of shares in a newly-formed entity, with the transaction anticipated to be completed in the first half of 2017. David Harding’s Winton Capital Management owned 1.13 million shares of Tegna Inc. (NYSE:TGNA) at the end of September.

Disclosure: None