Did The Rate Hike Scare Away These Companies’ Insiders?

The Federal Reserve raised interest rates last Wednesday for the first time in more than nine years, which triggered a massive sell-off in equities through the end of the week. Expectedly, last week’s insider selling activity increased relative to the previous one, as corporate insiders might have decided to diversify their holdings or raise capital for personal needs. Nonetheless, last week’s ratio of insider selling over insider buying remained relatively low as compared to the high levels registered over the past several months. Although corporate insiders can sell shares for a variety of reasons that are not related to their companies’ current valuations or future prospects, heavy insider selling still represents a cause for concern among investors. The Insider Monkey team pinned down several noteworthy insider sales reported last week, so this article discusses the insider selling registered at three companies and the recent performance of these companies.

Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does. We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. S&P 500’s 48.7% gain) over the last 38 months (see the details here).

Guess? Inc. (NYSE:GES) had a very influential insider sell big last week. Chief Operating Officer Michael Relich discarded 11,855 shares on Wednesday at prices that ranged from $20.34 to $20.55 per share, cutting his stake to 71,944 shares. The shares of this apparel retailer are 6% in the red year-to-date, as volatile global economic and market conditions have weighted on the company’s financial performance. A highly promotional environment and weaker mall traffic has also hindered the retail environment. Similarly, the depressed consumer confidence and low discretionary spending in Europe and the slowing customer spending growth in China and South Korea have put pressure on the company’s top and bottom lines this year. Guess? Inc. (NYSE:GES) reported net revenue of $1.55 billion for the nine months that ended October 31, down $174.9 million or 10.2% year-over-year. Nonetheless, net revenues in constant currency decreased by only 1.6% year-over-year. At the same time, its net earnings dropped by 16.2% year-over-year to $34.1 million. It should be mentioned that the stock trades at a relatively cheap price-to-earnings ratio of 19.09, which compares with the ratio of 22.65 for the S&P 500 companies. Joel Greenblatt’s Gotham Asset Management reported owning 2.37 million shares in Guess? Inc. (NYSE:GES) via its latest 13F filing.

Let’s head to the next page of this daily insider trading article, where we reveal the noteworthy insider sales reported at Simmons First National Corporation (NASDAQ:SFNC) and B/E Aerospace Inc. (NASDAQ:BEAV).

Simmons First National Corporation (NASDAQ:SFNC) is another company that registered heavy insider selling last week. Director Christopher R. Kirkland reported selling 40,000 shares last week at prices between $51.63 and $53.29 per share, all of which were held by a trust fund. After the recent sell-off, the trust fund owns 388,715 shares, while the Director also holds a direct ownership stake of 245,619 shares. The shares of the Arkansas-based financial holding company are up by 24% so far in 2015, despite experiencing a sharp pullback since the beginning of December. The company has grown considerably over the course of this year, thanks to its organic loan growth and growth from acquisitions. Simmons delivered loan growth of 44.6% for the third quarter of 2015 compared to the same period a year ago. Meanwhile, the company reported total interest income of $221.62 million for the nine months that ended September 30, up from $134.09 million reported for the same period a year ago. Simmons also registered record core earnings per share in each of the three quarters of 2015. The company generated net income of $50.3 million for the first nine months of 2015, up from $23.0 million reported in the same period of 2014. A mere five hedge funds from our database were invested in Simmons First National Corporation (NASDAQ:SFNC) at the end of the third quarter, while Jim Simons’ Renaissance Technologies was the most bullish among them with 115,500 shares.

Last but not least, B/E Aerospace Inc. (NASDAQ:BEAV) had three different executives sell stock last week. Ryan M. Patch, Vice President – Law, General Counsel, Secretary and Chief Compliance Officer since July 2009, unloaded 2,139 shares on Friday at a sale price of $41.37 per share, trimming his stake to 36,738 shares. Vice President and General Manager for the Commercial Aircraft Segment, Sean Cromie, sold 300 shares on Thursday at a weighted average price of $43.05 and currently holds 41,052 shares. Finally, President and Chief Executive Officer Werner Lieberherr reported selling 26,703 shares on the same day at prices ranging from $43.04-to-$43.16 per share, 15,128 shares of which were held by a family trust fund. After the recent sale, the CEO holds a direct ownership stake of 132,608 shares. The manufacturer of cabin interior products for commercial aircraft and business jets has seen its shares decline nearly 29% in 2015, which trade at a very appealing forward P/E ratio of 12.78 (the forward P/E ratio for the S&P 500 Index equals 17.19). The company has been undertaking cost reduction efforts, including facilities consolidation, product rationalization, workforce reduction and program discontinuance. At the same time, a higher global traffic, capacity, load factors and airline profitability in 2015 has assisted B/E Aerospace in delivering strong top-line growth despite facing weakening global economic conditions. A total of 46 smart money investors from our database had positions in the company at the end of the September quarter, amassing 36.40% of the company’s outstanding shares. Jonathon Jacobson’s Highfields Capital Management acquired a 4.31 million-share stake in B/E Aerospace Inc. (NASDAQ:BEAV) during the third quarter.

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