Cluster of Insider Selling at Cracker Barrel (CBRL), Retiring CEO of TE Connectivity (TEL) Sells Shares, Plus Other Insider Activity

Numerous studies have shown that corporate insiders earn substantial profits from trading the securities of their own firms. Although this is good news for outsiders, it might still be difficult to assess the implications of this finding for outside investors. Can an investor mimic insiders and make profits? If so, what is the scale of the profits?

Nonetheless, a number of studies have concluded that mimicking insiders is profitable, so investors should attempt to incorporate insider trading data into their analysis process. Most studies on insider trading behavior also arrived at a common conclusion: that insider buying always produces higher returns than insider selling. Hence, although the approach of blindly mimicking each insider trade and hoping to generate significant trading profits is associated with great risks, investors would definitely be better off by making use of insider trading data. That being said, let’s have a look at a set of noteworthy insider transactions, both insider purchases and sales, reported with the SEC on Monday.

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Top-Tier Executives at Insurance Holding Company Buy Shares

Two members of Conifer Holdings Inc. (NASDAQ:CNFR)’s executive team bought shares last week. To begin with, Chairman and CEO James G. Petcoff purchased 35,000 shares on Wednesday at a price tag of $7.20 each, boosting his direct ownership stake to 42,057 shares. Mr. Petcoff also holds an indirect ownership stake of 2.15 million shares, held in the James G. Petcoff Revocable Trust. President Brian J. Roney snatched up 2,000 shares last Monday at $7.34 apiece, which are held in an Individual Retirement Rollover Account (IRRA) that currently owns 31,908 shares. The President also owns an aggregate of 251,012 shares directly.

The insurance holding company that markets and services its product offerings through specialty commercial and specialty personal insurance business lines has seen the value of its shares drop by 22% this year. Conifer Holdings Inc. (NASDAQ:CNFR) reported gross written premiums of $83.62 million for the first three quarters of 2016, up from $68.51 million recorded for the same period of the previous year. The increase reflects the company’s expansion in the hospitality, security services, low-value dwelling, and wind-exposed homeowners lines of business.

The next two pages of this article will discuss the fresh insider buying and selling action recently observed at a few other companies.

Several Executives at BDC Buy Shares After Announcing Big Dividend Cut

Two high-ranked executives at PennantPark Investment Corp. (NASDAQ:PNNT) also increased their holdings this past week. Aviv Efrat, Chief Financial Officer and Treasurer since February 2007, bought 28,000 shares on Wednesday at $7.08 apiece, a purchase that lifted his ownership to 96,102 shares. More importantly, Arthur H. Penn, the Founder, CEO and Chairman of PennantPark Investment, snapped up 10,000 shares for $7.09 each on Wednesday and 10,000 shares at $7.23 apiece on Friday, all of which are held by Pennant Park Investment Advisors LLC (of which Mr. Penn is the Managing Member), which currently owns 449,923 shares. Mr. Penn also holds a direct ownership stake of 183,400 shares.

PennantPark Investment Corp. (NASDAQ:PNNT) operates as a business development company (BDC) that provides debt and equity investments to U.S. middle-market companies in the form of senior secured debt, mezzanine debt and equity investments. The insider buying discussed above comes shortly after the BDC reported weaker-than-expected earnings and announced a cut in its quarterly dividend payment to $0.18 from $0.28 per share beginning from the first quarter of 2017. Nonetheless, one analyst from Baird believes PennantPark Investment’s income from investments will not even cover the reduced dividend. The analyst also recently suggested that the BDC is not receiving income from its group of energy-related loans. “Until the company begins preserving shareholders capital and covering its dividend with cash income, we believe the path of least resistance for the stock will be lower. We would be inclined to short the stock but the costliness of doing so against its 10% dividend yield leaves us reluctantly with a Neutral rating,” said the Baird analyst in a recent note. The shares of PennantPark are 19% in the green year-to-date. Peter Muller’s PDT Partners had 55,700 shares of PennantPark Investment Corp. (NASDAQ:PNNT) in its portfolio at the end of September.

Board Member of Prison REIT Buys Shares After Donald Trump’s Presidential Win

One member of Corecivic Inc. (NYSE:CXW)’s Board piled up some shares last week. Mark A. Emkes, Chairman of the Board of Directors, acquired 5,000 shares on Friday at prices varying from $22.06 to $22.09 per share. After the recent purchase, Mr. Emkes currently owns an aggregate of 35,755 shares.

The real estate investment trust specializing in owning and managing prisons and other correctional facilities has seen the value of its stock drop by 15% this year. Corecivic Inc. (NYSE:CXW)’s shares have been battered following the Justice Department’s decision to limit the role private prison operators play in managing federal prison populations. However, the election of Republican Donald Trump as the next President of the United States has triggered a surge in Corecivic’s shares. Trump has promised tougher law-and-order policies, as well as promised to deport up to 11 million people. Therefore, it would be safe to say that millions will need to be jailed during deportation proceedings should Trump keep his campaign promises, which implies more business for Corecivic and other prison operators. The number of hedge fund vehicles that we track in our system with long positions in Corecivic jumped to 27 from 15 during the third quarter. Paul Singer’s Elliott Management added a 2.31 million-share position in Corecivic Inc. (NYSE:CXW) to its portfolio during the September quarter.

On the final page of this insider trading article, we’ll discuss the fresh insider selling observed at two other companies.

CEO of Swiss Electronics Company Sells Shares After Announcing Decision to Step Down as CEO

Let’s turn our attention to some recent insider selling at TE Connectivity Ltd (NYSE:TEL), where the man in charge of the company offloaded a great deal of shares last week. Thomas J. Lynch, who will step down from his role as Chief Executive Officer in early-March, sold off a 97,745-share stake on Wednesday at prices that fell between $67.20 and $67.28 per share, which was held in a charitable remainder trust. Mr. Lynch, who will become Executive Chairman of the Board next year, also holds a direct ownership stake of 300,901 shares.

TE Connectivity Ltd (NYSE:TEL), a Swiss electronics company that makes connectors and sensors used by telecommunications, automotive, aerospace and energy companies, has seen its market capitalization increase by 4% this year. The sensor designer and manufacturer reported revenue of $3.33 billion for the quarter ended September 30 (the company’s fiscal year 2016 fourth quarter), up from $2.98 billion posted a year earlier. The company anticipates net sales in the range of $2.95 billion-to-$3.05 billion for the first quarter of its fiscal 2017. Richard S. Pzena’s Pzena Investment Management was the owner of 876,215 shares of TE Connectivity Ltd (NYSE:TEL) at the end of the September quarter.

Cluster of Insider Selling at Successful Restaurant Chain

Several executives at Cracker Barrel Old Country Store Inc. (NASDAQ:CBRL) trimmed their holdings last week, so let’s have a brief look at the cluster of selling observed at the company. To start with, Jeffrey M. Wilson, Principal Accounting Officer, Vice President and Corporate Controller, sold 360 shares on Friday at $165.20 apiece, cutting his stake to 3,003 shares. Nicholas V. Flanagan, Senior Vice President of Restaurant and Retail Operations, liquidated 10,000 shares on the same day at prices ranging from $164.11 per share to $165.55 per share. Following the Friday sale, Mr. Flanagan currently owns 12,679 shares. More importantly, President and CEO Sandra B. Cochran offloaded 30,000 shares on Friday at prices ranging from $164.33 to $165.92 per share. Ms. Cochran currently owns a total of 129,895 shares following the recent sale.

Cracker Barrel Old Country Store Inc. (NASDAQ:CBRL)’s restaurants have delivered ten-consecutive quarters of comparable-store sales growth, offsetting the weakness in the company’s retail business. The restaurant chain operated 641 Cracker Barrel stores in 43 states at the end of October, as well as two Holler & Dash Biscuit House locations in one state. The chain’s restaurants posted a 1.3% increase in same-store sales for the company’s first quarter of its fiscal 2017 ended October 28. The shares of Cracker Barrel are 27% in the green thus far in 2016. Jim Simons’ Renaissance Technologies owned around 254,000 shares of Cracker Barrel Old Country Store Inc. (NASDAQ:CBRL) at the end of the September quarter.

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