It has been quite a while since the last time the stock market declined by 10%. The recent correction has been triggered by three primary factors: worries about China’s economic slowdown; falling commodity markets, which put downward pressure on emerging markets and commodity exporters; and expectations of an interest rate hike in September. Nevertheless, the recent correction has created great buying opportunities that cannot be missed. To this end, investors should monitor the trading activity of corporate insiders to see which company’s executives feel the shares of their companies have been hit overly hard and are now undervalued, and are buying them up as a result. The Insider Monkey team identified three companies that had noteworthy insider purchases on Wednesday. In the following article, we will take a thorough look at the insider trading activity of these companies, which are Virginia National Bankshares Corporation (OTCMKTS:VABK), Harvard Bioscience Inc. (NASDAQ:HBIO), and Church & Dwight Co. Inc. (NYSE:CHD).
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Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. 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 the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 118% over the ensuing 36 months, outperforming the S&P 500 Index by nearly 61 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
We will start off by looking into the insider activity at Virginia National Bankshares Corporation (OTCMKTS:VABK), which operates as the holding company for Virginia National Bank. William Bolling Izard, who has been a Director of the company since 2012, reported purchasing 4,000 shares for $23 each on September 2, in addition to the 1,000 shares bought at the beginning of the week. Following these transactions, the director owns 26,531 shares. The recent mini-crash of the broader market has not affected the shares of this holding company too much, as they are traded over-the-counter. Even so, the recent insider buying activity at the company might suggest that the shares are currently trading at a discount nonetheless. Virginia National Bank’s management has outlined a clear goal of growing its loan balances without hurting the asset quality of its loan portfolio. The company’s total loans amounted to $367.1 million on June 30, which was up by $53.8 million from the figure registered on December 31, 2014. Therefore, this increase indicates that the company is making progress towards achieving this objective.
Let’s move on to Harvard Bioscience Inc. (NASDAQ:HBIO), a global developer, manufacturer, and marketer of a wide range of solutions to advance life science. Jeffrey A. Duchemin, President and Chief Executive Officer, added 2,000 shares of the company at a price of $4.41 per share to his stake, which now comprises 150,210 shares. Additionally, one of the company’s directors, John F. Kennedy, also acquired 2,000 shares this week at $4.33 apiece, amassing a stake of 177,330 shares in the process. The shares of Harvard Bioscience have been on a downtrend since the end of June, losing nearly 22% year-to-date. The recent corporate insider purchases imply the aforementioned downtrend is groundless, which might actually be the case given that the company had a strong second quarter. Harvard Bioscience’s revenues increased by 7% year-over-year to $28.8 million despite facing continued foreign exchange headwinds. The company also reported non-GAAP net income of $1.6 million, compared to $1.9 million reported in the same quarter of 2014. Chuck Royce’s Royce & Associates is one of the largest shareholders of Harvard Bioscience Inc. (NASDAQ:HBIO) within our database, owning 1.32 million shares at the end of June.
Finally, let’s look at the recent insider buying activity at Church & Dwight Co. Inc. (NYSE:CHD). The company has not seen insider buying activity for a few years, which makes the recent purchase made by Independent Director Janet S. Vergis quite significant. Specifically, she reported buying 1,000 shares at a price of $84.82 per share, lifting her stake to 2,100 shares. Even though Church & Dwight Co. is set to face aggressive competition and a strong U.S. dollar, the manufacturer of a broad range of personal care, household, and specialty products is confident that its 2015 business targets will be achieved. Church & Dwight Co.’s management also reckons that its innovative focus and a potential gross margin expansion will assist the company in reaching a 7-9% adjusted earnings per share (EPS) growth this year. Phill Gross and Robert Atchinson’s Adage Capital Management, which is piling up more shares of Five Prime Therapeutics Inc. (NASDAQ:FPRX) today, is the top equity holder of Church & Dwight Co. Inc. (NYSE:CHD) within our database, owning over 774,000 shares.
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