As the U.S. third-quarter earnings season is set to kick off in the upcoming days, the insider trading activity has shown signs of weakness in the past several trading sessions. Insider trading policies permit Board members and executives to buy and sell shares of their companies during specific trading windows. These trading windows are usually open for insiders after companies disclose their quarterly financial results and are closed before the end of each fiscal quarter. The presence of these trading windows explains the weakening insider trading activity observed recently.
After five consecutive quarters of earnings declines, investors will likely experience another “bad” quarter of earnings. The aggregate third-quarter earnings for the companies comprising the S&P 500 Index are anticipated to decline 2.1%. Assuming that the third-quarter earnings season will put weight on U.S. equities in the upcoming weeks, one might anticipate insider buying to revitalize as a result. By constructing a rolling purchase portfolio that holds shares purchased by insiders, one study finds that the portfolio earned abnormal returns of around 40 basis points per month. This study represents strong evidence that insider trading activity, particularly insider buying, is worth monitoring on a daily basis. That said, this article will discuss fresh insider buying and selling activity reported with the SEC on Friday.
Through extensive research that covered the portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).
CEO of Provider of IT Services to U.S. Federal Government Agencies Purchases Shares
The man in charge of NCI Inc. (NASDAQ:NCIT) purchased some shares of his company this past week. President and Chief Executive Officer Brian J. Clark snatched up 3,000 shares on Thursday at a price tag of $11.10 per share. After the recent purchase, Mr. Clark currently owns 162,962 shares.
The provider of information technology (IT) and professional services and solutions to U.S. defense, intelligence, health care and civilian government agencies has seen the value of its shares plunge by 14% since the start of the year. NCI Inc. (NASDAQ:NCIT) recorded revenue of $81.90 million for the quarter that ended June 30, which marked a decrease of 4.5% year-over-year. The decrease in the company’s top line mainly reflects completed contracts, work that was set aside for small businesses, as well as reductions in staffing and scope of work on certain contracts. The number of hedge funds followed by Insider Monkey with long positions in NCI fell to three from five during the second quarter. Jim Simons’ Renaissance Technologies LLC owned around 420,000 shares of NCI Inc. (NASDAQ:NCIT) at the end of June.
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The next two pages of this article discuss fresh insider trading at four other companies.