While the interpretation of insider buying activity is quite straightforward, heavy insider selling does not automatically raise red flags within the investment community. The increased usage of equity-based compensation has distorted insider trading data, which makes it particularly cumbersome to accurately interpret insider selling. At the end of the day, directors and officers sell shares for numerous reasons such as tax payments or diversification, so it is practically impossible to find out why insiders unload their equity holdings. Nonetheless, when certain companies witness three or more insiders sell shares within a short period of time, outside investors could certainly interpret that kind of activity as a sign that those companies are approaching or even exceeding fair market value according to the estimates of their insiders. If the individuals running companies are jettisoning shares, it does not necessarily make sense for non-insiders to own those companies’ shares. Insider Monkey processed numerous Form 4 filings submitted with the SEC on Friday and pinpointed three companies with eye-catching insider selling.
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This Airline’s CEO Sold Big This Past Week
To begin with, the man in charge of Delta Air Lines Inc. (NYSE:DAL) reported selling a massive amount of shares last week. Chief Executive Officer Richard H. Anderson sold 123,704 shares on Friday at prices varying from $47.40 to $47.51 per share, of which 39,655 shares were sold from the living trust of Mr. Anderson’s wife. After the recent sales, Mr. Anderson, who recently announced his intention to retire as CEO in May, holds a direct ownership stake of 326,708 shares. Mr. Anderson will step down from his role as CEO effective May 2 and will be elevated to Executive Chairman of the company’s Board.
The recent insider selling comes after the Atlanta-based airline released its financial results for the March 2016 quarter. Delta Air Lines Inc. (NYSE:DAL)’s operating revenue decreased by 1.5% year-over-year, to $9.25 billion, slightly below analysts’ expectations of approximately $9.28 billion. The company’s March quarter top-line figure was mainly impacted by foreign currency headwinds, which impacted the figure by $125 million, as well as the terrible events that recently happened in Brussels. Passenger revenue per available seat mile (PRASM) decreased by 4.6% year-over-year on 2.7% higher capacity. The company’s pre-tax income for the quarter reached $1.4 billion, which marked an increase of $248 million year-over-year, mainly due to lower fuel prices and strong corporate demand. Adjusted net income was $1.32 per diluted share, notably higher than the $1.20 figure anticipated by analysts. Delta Air Lines’ management anticipates passenger unit revenue for the June 2016 quarter to decline by 2.5%-to-4.5% year-over-year.
Shares of Delta Air Lines are 6% in the red year-to-date and trade at only 6.7-times expected earnings. As price-to-earnings multiples are mostly relevant when making a peer-to-peer comparison, investors should note that American Airlines Group Inc. (NASDAQ:AAL) has a forward P/E multiple of 6.4 and United Continental Holdings Inc. (NYSE:UAL) has a slightly lower ratio of 6.3. A total of 108 hedge funds tracked by Insider Monkey were invested in the Atlanta-based airline at the end of the fourth quarter, and held almost 20% of the company’s outstanding shares. Charles Paquelet’s Skylands Capital upped its stake in Delta Air Lines Inc. (NYSE:DAL) by 38% during the first quarter of this year, to 212,400 shares.
Ennis’ Former Executive Sells Shares Following the Sale of Division He Oversaw
Ennis Inc. (NYSE:EBF) has also witnessed high insider trading activity on the sell side in recent weeks. Irshad Ahmad, who no longer serves as an officer of Ennis following the company’s sale of its Apparel Division to Alstyle Operations LLC on April 1, sold 19,867 shares on Thursday for $19.97 each, trimming his overall holding to 11,474 shares. Mr. Ahmad, who served as Vice President of the Apparel Division and Chief Technology of Ennis, will continue to serve as an employee of the Apparel Division at Alstyle following the closing of the aforementioned transaction, with his employment having been transferred to A and G Inc, an affiliate of Alstyle’s. Ennis sold its apparel division for approximately $88 million, which included $76 million in cash and $12 million paid under a capital lease that is set to cover certain retained equipment utilized by the Apparel Division.
Ennis prints and manufactures a wide line of business forms and business products through the Print segment, as well as formerly manufacturing a line of activewear through the aforementioned Apparel Division. The Print segment distributes business products and forms in the United States mainly through independent dealers, while the Apparel Division produced and sold activewear, including T-shirts, fleece goods and other wearables. The company’s net consolidated sales for the nine months that ended November 30 totaled $440.8 million, up slightly from $440.0 million reported for the same period of the prior year. Print sales increased by 3.8% year-over-year to $294.7 million, mainly due to the impact of recent acquisitions. Meanwhile, apparel sales decreased by 6.5% to $146.0 million due to a weak lower-end domestic retail environment and stricter adherence to selling price preservation. Ennis decided to sell the Apparel Division because it was seen as a non-core asset. The proceeds from the sale will be channeled into expanding the Print Segment through strategic acquisitions.
Shares of Ennis have advanced by 42% in the past 12 months, which may serve as yet another reason behind Mr. Ahmad’s recent sales. The stock is priced at around 15.0-times expected earnings, below the forward P/E ratio of 18.5 for the S&P 500 Index. There were 16 hedge funds in our system with stakes in the company at the end of December, with them having accumulated 6% of its outstanding shares. Jim Simons’ Renaissance Technologies owned 481,000 shares of Ennis Inc. (NYSE:EBF) on December 31.
Two Executives of This Subscription Warehouse Club Sold Shares Last Week
PriceSmart Inc. (NASDAQ:PSMT) had two influential officers sell shares this past week. To begin with, Executive Vice President and Chief Financial Officer John M. Heffner unloaded 3,266 shares on Thursday at prices that ranged from $84.79 to $84.81 per share, trimming his overall holding to 34,886 shares. In the meantime, Executive Vice President and Chief Merchandising Officer, Thomas D. Martin, discarded 1,355 units of common stock two days earlier for $81.54 apiece, which reduced his ownership to 44,322 units.
PriceSmart’s business operations involve international membership shopping warehouse clubs, with the company having 38 such clubs in operation in 12 countries and one U.S. territory: six each in Costa Rica and Colombia; five in Panama; three each in Guatemala, Honduras, and the Dominican Republic, two each in El Salvador and Nicaragua, and one each in Aruba, Barbados, Jamaica, and the United States Virgin Islands. The company’s net warehouse club sales for the second quarter of fiscal year 2016 that ended February 29 increased by 3.7% year-over-year to $758.99 million. The increase was driven by the addition of one warehouse club in Panama and one in Nicaragua, as well as one additional day of sales (February 29). All countries registered year-over-year growth in sales in the second quarter, save for Colombia. Net warehouse sales generated in Colombia dropped by 32.1% year-over-year due to a 37.8% devaluation of the Colombian peso (COP) against the green buck. Fiscal second quarter net warehouse sales growth was mainly attributable to a 6.4% increase in transactions, which was somewhat offset by a decrease in average ticket. Net income increased to $25.94 million from $24.84 million reported for the second quarter of fiscal year 2015.
The number of money managers in our system with stakes in the subscription warehouse club declined to eight from 12 during the December quarter. Shares of PriceSmart have advanced by 2% since the beginning of 2016 and are up by 7% in the past 12 months. The stock trades at a forward P/E ratio of 24.4, which is significantly above the ratio of 18.5 for the companies included in the S&P 500. Murray Stahl’s Horizon Asset Management cut its stake in PriceSmart Inc. (NASDAQ:PSMT) by 14% during the March quarter to 6,069 shares.