U.S. equities closed sharply in the green on Friday, marking the fourth consecutive week of strong gains for the major U.S stock indexes. The S&P 500 Index has advanced by 8.4% over the past month, while the Dow Jones Industrial Average is up by 7.8%. In fact, the 8.4% four-week gain for the S&P 500 represents its strongest four-week rally in percentage terms since late 2011. It is also worth pointing out that both the S&P 500 benchmark and the Dow crossed their 200-day moving averages on Friday, which is great news for both technically-oriented and other investors. Surprisingly, the dollar volume of insider buying continues to remain at relatively high levels despite the recent rally. As a matter of fact, last week’s volume of insider buying increased relative to the volume registered during the week prior, whereas the volume of insider selling dropped slightly week-over-week. This is probably because U.S equities were swinging around wildly throughout the first trading days of the past week, failing to extend the previous weeks’ rally up until Friday’s strong session. The Insider Monkey team processed dozens of Form 4 filings submitted with the SEC last week and identified three companies with noteworthy insider purchases, which we’ll look at in this article.
Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).
Let’s begin our insider trading investigation by taking an in-depth look at the insider buying activity witnessed at Malvern Bancorp Inc. (NASDAQ:MLVF). To start with, Senior Vice President and Chief Risk Officer Woolworth William III purchased a new stake of 1,000 shares on Wednesday for $16.21 apiece, which is held by an individual retirement account (IRA). The CRO also holds a direct ownership stake of 1,071 shares. On March 4, Chief Executive Officer and President Anthony C. Weagley bought 2,500 shares for exactly $16.00 each and currently owns 29,706 shares. Last but not least, Director Howard A. Kent snapped up 44,100 shares on the same day at a weighted average price of $16.00, of which 10,000 shares were purchased by or for his spouse. The remaining shares are held indirectly via joint ownership. The Director also owns 26,140 shares directly.
Malvern Bancorp Inc. (NASDAQ:MLVF) is the holding company for Malvern Federal Savings Bank, which primarily focuses its lending activities on retail clients, commercial lending to small- and medium-sized businesses, real estate developers and high net worth individuals. Although the recent insider buying activity at the federally chartered stock savings bank is not overly voluminous, the cluster of insider buying may be suggesting that the company’s shares are undervalued by the market. Shares of Malvern Bancorp have lost 7% since the beginning of 2016, though they are up by 22% over the past 12 months. Just recently, the company released its financial results for the first quarter of fiscal year 2016 that ended December 31, posting net income of $1.3 million for the quarter, a big jump from the net income of $321,000 reported for the same period of the prior year. The company’s net interest margin climbed by 11 basis points year-over-year to 2.72% during the three-month period. Meanwhile, the stock is priced at 14.73-times expected earnings, above the forward P/E multiple of 12.70 for the Financials sector.