Numerous studies completed by reputable researchers and professors from top-tier universities have arrived at the conclusion that corporate insiders tend to earn abnormal returns when buying shares of their companies. Similarly, a high number of studies concluded that non-insiders can also achieve better returns by tracking insider trading activity.
Although some of studies may be viewed as outdated and somewhat irrelevant, the reasoning behind tracking insider trading activity remains as strong and durable today. As well-known investment guru Peter Lynch once said: “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.” Indeed, this line of thought still applies today, as it is hard to believe that insiders are investing their hard-earned money in their own company’s stock for reasons other than the fact that they anticipate price appreciation. For that reason, the following article primarily focuses on discussing fresh insider buying observed at several companies, as well as on discussing a cluster of insider selling.
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).
Two Important Executives at Transitioning Consumer-Products Company Buy Shares
Two of the most well-informed and influential executives at Newell Brands Inc. (NYSE:NWL) bought shares earlier this week. To begin with, Chief Executive Officer Michael B. Polk bought 7,500 shares at $49.68 apiece on Monday and 4,000 shares for $47.82 each on Tuesday. Following the two purchases, Mr. Polk currently holds a direct ownership stake of 334,169 shares. President Mark Tarchetti bought 12,436 shares on Monday at prices varying from $48.12 to $48.18 per share, a purchase that lifted his overall holding to 188,995 shares.
In mid-April of this year, the distributor of consumer and commercial products, previously known as Newell Rubbermaid, completed the acquisition of consumer products company Jarden Corporation. The newly-combined entity anticipates to achieve annualized cost synergies of $500 million over the next four years, driven by efficiencies of scales and new efficiencies in procurement. Newell Brands Inc. (NYSE:NWL), best known for its popular line of tupperware products, has seen the value of its shares advance by 9% since the start of the year. The company recently posted revenue of $3.95 billion, up from $1.53 billion recorded a year ago. Indeed, the increase reflected the Jarden acquisition completed in April. Charles Paquelet’s Skylands Capital reported ownership of 4,596 shares of Newell Brands Inc. (NYSE:NWL) in its 13F for the third quarter.
The next pages of this article will reveal some other insider trading observed at four other companies.