EVINE Live Inc. (EVLV) Registers Massive Cluster of Insider Buying; Nimble Storage Inc. (NMBL) and Operator of FYE Chain Also Witness Noteworthy Purchases

Previous research shows that insider buyers have a relatively good feel for near-term and long-term developments within their companies. Although the current regulatory system with regard to insider trading imposes the short-swing rule, which forces insiders to hold freshly-acquired shares for six months before cashing out, corporate insiders are found to earn abnormal returns when holding positions for six months or longer. Indeed, corporate insiders have valuable information, which practically explains why their purchases tend to outperform broader market benchmarks. In fact, it is impossible to design and implement a regulatory system that could prevent insiders from trading profitably, and there is no need to. As long as insider transactions do not diminish the trust in equity markets, which could force outsiders to flee those markets, there is no need for stricter regulatory frameworks for insider trading. With that in mind, the following article will discuss the insider buying activity observed at three small-priced and seemingly overlooked 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).

EVINE Live Inc. (NASDAQ:EVLV) saw six different insiders purchase shares this week. Truth be told, this massive cluster of insider buying must be interpreted as a bullish sign by all investors. To start with, Nicholas J. Vassallo, Senior Vice President and Corporate Controller, purchased 16,700 shares on Monday at prices ranging from $0.84 to $0.86 per share. Mr. Vassallo also received a grant of 46,023 restricted shares as a long term incentive award. After the recent transactions, Mr. Vassallo currently owns a stake of 101,430 shares, including restricted stock units. Interim Chief Executive Officer Robert J. Rosenblatt snapped up 305,000 shares on Monday and Tuesday at prices varying from $0.90 to $1.01 per share, boosting his holding to 335,570 shares. Director Lisa A. Letizio bought a new stake of 15,000 shares on Monday at a weighted average cost of $0.99. The Director also holds an indirect ownership stake of 32,344 shares held through a trust fund, called Lisa A. Letizio Revocable Living Trust. Moreover, Damon E. Schramm, Senior Vice President, General Counsel and Secretary, acquired 20,000 shares on Monday at prices that fell between $0.92 and $0.94, as well as received a grant of 46,875 restricted shares, which boosted his stake to 71,375 shares. Chief Financial Officer Tim A. Peterman reported the purchase of a new stake of 160,000 shares at a weighted average price of $0.90, which is entirely held by his wife. Last but not least, Jaime Nielsen, Vice President of Human Resources, bought 19,000 units of common stock on Monday and received a grant of 38,352 restricted shares, which lifted her stake to 73,991 shares.

EVINE Live Inc. (NASDAQ:EVLV) is a digital commerce company that operates a 24-hour television shopping network, named EVINE Live, through which the company offers a wide range of brand name and proprietary products in the following categories: jewelry & watches; home & consumer electronics; beauty; and fashion & accessories. Even though the company managed to generate more revenues during fiscal 2015 than during the previous year, EVINE’s bottom-line results disappointed both the management and investors. The company’s net sales for fiscal 2015 that ended January 30 totaled $693.31 million, up from $674.62 million reported for the prior year. Nonetheless, EVINE’s fiscal 2015 net loss reached $12.28 million, as compared to a net loss of only $1.38 million for fiscal 2014. Even so, the management anticipates to reduce its full-year operating expenses by $5 million by implementing corporate overhead reductions and other operating expenses cuts. Shares of EVINE have declined 84% in the past 52 weeks and appear to be in a bottoming out phase at the moment. According to a freshly-submitted 13D filing, Jeffrey Bronchick’s Cove Street Capital owns 5.32 million shares of EVINE Live Inc. (NASDAQ:EVLV), which account for 9.3% of the company’s total number of shares.

Let’s head to the next page of this article, where we discuss the insider buying registered at Nimble Storage Inc. (NYSE:NMBL) and Trans World Entertainment Corporation (NASDAQ:TWMC).

Although Nimble Storage Inc. (NYSE:NMBL) did not witness the abundance of insider buying registered at EVINE Live, the insider trading activity at the provider of a cloud-based data storage platform is still worth investors’ attention. Director William J. Schroeder purchased 40,000 shares Monday through Wednesday at prices that ranged from $6.94 to $7.28 per unit, all of which are held directly by the William J. and Marilee J. Schroeder Revocable Trust. After the recent purchases, the trust fund continues to hold a stake of 160,000 shares. Mr. Schroeder also holds a direct ownership stake of 20,870 shares.

Nimble Storage operates in a highly-competitive market; the storage market has been dominated very large corporations that may hinder the company’s growth prospects in the years ahead. Nimble Storage primarily competes with providers of enterprise storage products such as Dell Inc., EMC Corporation (NYSE:EMC), Hewlett Packard Enterprise Co (NYSE:HPE), and NetApp Inc. (NASDAQ:NTAP). Shares of Nimble Storage have plummeted 67% in the past 12 months and are down 20% in 2016 alone. Just recently, a number of financial hubs downgraded the company, following the release of its financial results for the fourth quarter and fiscal year 2016 that ended January 31. Particularly, the weak guidance for fiscal 2017 was what triggered the wave of downgrades and price target cuts. Analysts at J.P. Morgan downgraded Nimble Storage to ‘Neutral’ from ‘Overweight’ and slashed the 12-month price target to $8 from $15, citing short-term risk. Similarly, analysts at Piper Jaffray downgraded the stock to ‘Neutral’ from ‘Overweight’ and lowered the price target to $9 from $20, citing extending sales cycles, uncertain technical merits of the all-flash platform, as well as higher operating expenses. Nimble Storage generated fiscal 2016 total revenue of $322.22 million, up from $227.67 million reported for the prior year. The company’s management anticipates total revenue in the range of $83.0-to-$86.0 million for the first quarter of fiscal 2017. The management also expects non-GAAP operating loss in the range of $20.0-to-$22.0 million, which is substantially higher than analysts’ estimates of $12.9 million. A total of 21 hedge funds from our sizable database were invested in Nimble Storage at the end of December 2015, accumulating 12.60% of the company’s shares. Brett Barakett’s Tremblant Capital upped its position in Nimble Storage Inc. (NYSE:NMBL) by 63% during the December quarter to 3.45 million shares.

Trans World Entertainment Corporation (NASDAQ:TWMC) also witnessed some insider buying this week. Chairman Robert J. Higgins, founder of the FYE music/video chain who stepped down as Chief Executive Officer in 2014, purchased an aggregate of 65,000 shares during the first three trading sessions of this week at a weighted average price of $3.71, boosting his ownership to 14.27 million shares. Mr. Higgins also holds an indirect ownership stake of 137,500 units of common stock, held by the Higgins Foundation.

Trans World Entertainment Corporation is a specialty retailer of entertainment products such as video, music, electronics, video games and other related products. The company operates 299 retail entertainment stores, primarily under the names f.y.e. for your entertainment and Suncoast Motion Pictures. The company’s total sales for fiscal 2015 that ended January 30 were $334.66 million, which decreased from $358.49 million reported for the prior fiscal year. Nonetheless, the company’s comparable store sales decreased by only 0.7% year-on-year. Net income for fiscal 2015 reached $2.69 million, or $0.09 per diluted share, up from $1.78 million, or $0.06 per diluted share, reported for the previous year. The specialty retailer has seen its shares advance 3% since the beginning of 2016. There were only four hedge funds tracked by Insider Monkey with stakes in the company at the end of 2015, accumulating almost 10% of its outstanding common stock. Jim Simons’ Renaissance Technologies reported owning 593,200 shares of Trans World Entertainment Corporation (NASDAQ:TWMC) through the 13F for the December quarter.

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