Insider selling has been more prominent than insider buying over the last several months, which could somewhat suggest that insiders do not foresee strong upside for their companies or at least the market in general, in the foreseeable future. In fact, insiders are not the only ones who suggest that U.S equities are overvalued at the moment. Reputable activist investor Carl Icahn resides in the camp of investors who believe that the stock market is currently overpriced, mainly as a result of the Federal Reserve’s monetary policy and companies’ overstated earnings. But will the U.S stock market enter a bearish phase in the upcoming future? This is the million dollar question, and no one can accurately foresee what the future holds. However, individual investors can closely examine insider selling activity so as to get a general view of how insiders feel about their companies’ prospects and their stock’s future potential. Heavy insider selling does not necessarily point to short-selling opportunities, but this type of activity should still represent a key stock picking tool of investors. The Insider Monkey team identified three companies with notable insider sales of late, and this article will lay out those trades and discuss the recent performance of those companies.
Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does besides providing high-quality articles. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
DexCom Inc. (NASDAQ:DXCM) has registered a high volume of insider selling activity over the past several days, but most insider sales were related to freshly-exercised stock options or were conducted under trading plans. Hence, we will discuss only the spur-of-the-moment insider sales registered by insiders of the medical device company. Senior Vice President and Chief Financial Officer Jess Roper sold 20,000 shares on Thursday at prices in the range of $83.75-to-$84.36, 5,500 shares of which represent freshly-vested, non-qualified stock options. As a result, the CFO currently holds 83,924 shares, while his net sale added up to 14,500 shares. Moreover, Chief Technical Officer Jorge Valdes reported the sell-off of 40,500 shares last Monday at prices ranging from $83.02-to-$83.98 per share, while 30,000 of those shares represented freshly-vested stock options. The remaining 10,500-share block was held by the Valdes-Lopez-Calleja Family Trust, where the CTO serves as a trustee. Following those transactions, the CTO holds a direct ownership stake of 92,437 shares, along with an additional 7,272 shares held indirectly via the aforementioned trust fund. The glucose-monitoring company has seen its shares advance by 50% since the start of 2015 despite being caught in the ‘biotech’ sell-off at the end of September. DexCom Inc. (NASDAQ:DXCM) was the fifth-largest equity holding of Clifford Fox’s Columbus Circle Investors at the end of the third quarter (read more details).
Let’s refocus our attention on the insider selling activity at BioSpecifics Technologies Corp. (NASDAQ:BSTC), which has seen its top executive unload holdings recently. President and Chief Executive Officer Thomas L. Wegman reported selling 3,136 shares on Monday and 24,015 shares on Friday at prices between $50.00 and $53.50 per share. The CEO cut his overall holdings to 147,671 shares through these transactions. The biopharmaceutical company continued the global expansion of its collagenase-based product XIAFLEX during the third quarter, with its first commercial sale in Japan. Earlier this month, BioSpecifics reported third quarter net income of $2.9 million on revenue of $6.3 million, compared with net income of $1.4 million on revenue of $4.0 million reported in the same period a year ago. The shares of BioSpecifics are 29% in the green year-to-date. Meanwhile, seven hedge funds monitored by Insider Monkey owned stakes in the biopharmaceutical company at the end of the second quarter. Jim Simons’ Renaissance Technologies reported owning 192,700 shares of BioSpecifics Technologies Corp. (NASDAQ:BSTC) via its 13F filing for the September quarter.
ServiceNow Inc. (NYSE:NOW) has registered a large volume of insider selling over the past few days, but this paragraph will only discuss the insider trades that were not conducted under trading plans and do not relate to freshly-exercised stock options. Director Paul V. Barber reported selling 100,000 shares last week at prices in the range of $82.70-to-$84.88 per share, all of which were held by several revocable living trusts for which the Director is a beneficiary and may be deemed to control investment decisions. After this sizable sell-off, the Director holds an indirect ownership stake of 694,291 shares. The shares of the provider of cloud-based solutions have gained 24% since the beginning of the year and are trading near their all-time high of $85. ServiceNow’s solutions are designed to automate workflow and can enable large companies to improve their workforce efficiency. The company has been growing at an incredible pace since its IPO back in 2012 and still has a wide array of opportunities ahead. ServiceNow’s primary priority at the moment is to lure more clients to its cloud-based services, which are expected to boost its top- and bottom-line in the quarters and years ahead. In the meantime, 30 hedge funds within our database had positions in the promising company at the end of the June quarter, stockpiling 5.50% of its outstanding shares. Christopher Lord’s Criterion Capital Management slightly upped its stake in ServiceNow Inc. (NYSE:NOW) during the third quarter to 2.80 million shares.