Delta Air Lines Inc. (DAL) and Two Other Companies Receive Vote of Confidence from Corporate Insiders

Numerous stock market participants perceive insider buying activity as being much more informative than insider selling, and rightly so. Board members and executives are usually buying shares in their own companies because they anticipate better times ahead, but they can sell shares for a wide array of reasons that are not necessarily related to their companies’ current development or even future outlook. The well-known former manager of the Magellan Fund at Fidelity Investments, Peter Lynch, once said that “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise”.

Nonetheless, those investors closely monitoring insider trading metrics should keep in mind that insiders may be wrong on some occasions, like any other human being. As a Barron’s article recently quoted Dr. Inan Dogan, the founder of Insider Monkey, as saying that “One insider might overestimate a company’s prospects, but there is higher certainty when many insiders are buying”. Hence, investors need to look for clusters of insider buying, often perceived as very bullish signals. That said, the following article will discuss fresh noteworthy insider buying activity recently registered at three companies.

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).

Struggling Airline Registers Notable Insider Buying

Soon after its freshly-retired CEO unloaded a sizable block of shares in mid-July, Delta Air Lines Inc. (NYSE:DAL) had one member of its executive team make a voluminous purchase earlier this week. Paul A. Jacobsen, Chief Financial Officer and Executive Vice President, acquired 25,000 shares on Monday at prices varying from $38.85 to $38.97 per share. After the recent purchase, Mr. Jacobsen currently holds an ownership stake of 328,631 shares.

The second-largest airline in the United Stats by traffic has lost 23% of its market value since the beginning of 2016. Delta Air Lines Inc. (NYSE:DAL)’s passenger revenue per available seat mile (PRASM) decreased by 4.9% on 3.2% higher capacity in the June quarter, reflecting weakness in the domestic close-in yields environment, the impact of the U.S. dollar strength on international markets, as well as supply-demand imbalances in the Atlantic region and China. The carrier anticipates passenger unit revenue to drop in the range of 4%-to-6% for the September quarter, so things aren’t getting better for the company just yet. Delta Air Lines also intends to reduce its U.S.-U.K. capacity on its winter schedule due to the steep decline in the British pound and the ongoing economic uncertainty over the imminent Brexit.

The Atlanta-based Delta Air Lines fell out of favor with the hedge funds followed by Insider Monkey during the first quarter of 2016, with the number of funds invested in the airline dropping to 97 from 108 quarter-over-quarter. Those asset managers amassed roughly 18% of the company’s outstanding common stock. Charles Paquelet’s Skylands Capital LLC upped its position in Delta Air Lines Inc. (NYSE:DAL) by 15% during the June quarter to 242,550 shares.

Let’s head to the next page of this article, where we will discuss the insider buying registered at two other companies.

This Financial Holding Company Sees Two Insiders Purchase Shares Despite Strong Stock Performance

Wintrust Financial Corp (NASDAQ:WTFC) saw two different insiders purchase shares this past week, so let’s find out who stands behind the recent buying. H. Patrick Hackett Jr., Board member since 2008, snapped up 9,500 shares on Friday at a price tag of $53.11 each, lifting his ownership to 33,805 shares. Marla F. Glabe, another member of the company’s boardroom, bought 380 shares on the same day for $53.24 each. Following the recent purchase, Ms. Glabe currently owns 2,501 shares.

The insider buying comes a little more than a week after the financial holding company that provides traditional community banking services released its second-quarter earnings report. Wintrust Financial Corp (NASDAQ:WTFC) recorded net income of $50.0 million or $0.90 per diluted share, up from net income of $49.1 million or $0.90 per diluted share posted a year ago. In late June, Wintrust Financial inked a deal to acquire roughly $581 million in performing loans and related relationships from General Electric Company (NYSE:GE)’s GE Capital Franchise Finance, as part of General Electric’s plan to focus on its high-value industrial businesses. The loans are made to franchise operators, mainly quick services restaurant concepts, in the Midwest and in the Western portion of the United States. Wintrust Financial anticipates to complete the acquisition in the third quarter of this year.

There were 12 asset managers from our database invested in Wintrust Financial at the end of the March quarter, as compared to 14 recorded at the end of the December quarter. Wintrust shares are up 9% thus far in 2016. Ken Fisher’s Fisher Asset Management cut its stake in Wintrust Financial Corp (NASDAQ:WTFC) by roughly 1% during the April-to-June quarter to 1.31 million shares.

Industrial Distributor of Maintenance and Repair Supplies Has CEO Pile up Some Shares

The man in charge of Lawson Products Inc. (NASDAQ:LAWS) was caught buying some shares earlier this week. President and CEO Michael G. DeCata snatched up 1,000 shares on Tuesday at $18.05 apiece. After the recent purchase, Mr. DeCata currently owns 18,591 shares.

The industrial distributor of maintenance and repair supplies has seen the value of its shares plunge by 24% since the start of 2016, mainly due to a disappointing second-quarter earnings report. Lawson Products Inc. (NASDAQ:LAWS)’s net sales for the second quarter of 2016 decreased by 1.9% year-over-year to $69.35 million, reflecting a general slow-down in the maintenance, repair and operations (MRO) marketplace, weaker demand from customers operating in the oil and gas industry, the weaker Canadian dollar and lower productivity from newly-hired sales representatives. The company’s bottom line decreased to $0.2 million from $2.9 million reported a year ago, mainly driven by lower sales, increased investment in its sales team and higher acquisition-related costs.

Lawson Products’ shares are currently changing hands at around 35.3-times expected earnings, significantly above the forward PE multiple of 16.6 for the industrials sector. A mere four hedge fund vehicles monitored by our team were invested in the company at the end of March, hoarding up approximately 5% of its total number of outstanding shares. Richard Driehaus’ Driehaus Capital had 85,562 shares of Lawson Products Inc. (NASDAQ:LAWS) among its holdings at the end of the first quarter.

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