Oscar Munoz, the man in charge of United Continental Holdings Inc. (NYSE:UAL), suffered a heart attack in October of 2015 and came back to work in March. In late April, the CEO bought $1 million worth of United’s stock at prices of between $50.50 and $50.55 per share, while the airline’s shares are currently changing hands at less than $45 a share. Joining Mr. Munoz in purchasing shares were a number of other executives at the company, which has seen its market value decline by 22% since the start of 2016. I’m displaying this example to show that eye-catching clusters of insider buying may not necessarily lead to huge trading profits in the near-term. That’s because executives and directors tend to act as long-term, contrarian investors rather than short-term-oriented investors. And even if insiders’ purchases had been followed by massive stock price appreciation in the short-term, they would have been able to cash in only after six months due to regulations put in place by the SEC. Hence, retail investors seeking to incorporate insider trading metrics in their stock analysis process should take a long-term view on investing. With this in mind, the following article will discuss a cluster of insider buying last week, plus several insider purchases and sales recorded with the SEC on Monday.
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).
This Provider of Non-Traditional Lodging Registers Insider Buying for the First Time in 2016
Just a few days ago, Interval Leisure Group Inc. (NASDAQ:IILG) registered insider buying activity for the first time this year. Precisely, Board member Thomas O. Ryder bought 30,000 shares on Friday at prices between $14.63 and $14.77 per share, boosting his overall holding to 33,403 shares.
The provider of non-traditional lodging has seen its market capitalization drop by nearly 6% since the start of the year. In early May, Interval Leisure Group Inc. (NASDAQ:IILG) completed the previously-announced acquisition of the vocational ownership business of U.S hotel operator Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT). Interval Leisure Group posted revenue of $185.9 million for the first three months of 2016, up from $184.6 million recorded a year earlier. Jim Simons’ Renaissance Technologies had 942,800 shares of Interval Leisure Group Inc. (NASDAQ:IILG) in its portfolio at the end of March.
This Casino Entertainment Company Had a Board Member Initiate a New Stake
Paul W. Whetsell, who was appointed to Boyd Gaming Corporation (NYSE:BYD)’s Board of Directors in late January of 2015, acquired a new stake of 7,500 shares on Thursday for $19.52 each. Although the size of the purchase was not overly significant, this type of insider buying should be closely monitored by the investment community. Why? Simply because Mr. Whetsell could have bought a new stake soon after his appointment, but chose not to until last week.
The shares of the casino entertainment company have advanced by 32% in the past 12 months, which makes us believe that Mr. Whetsell sees improving prospects for the company ahead. Boyd Gaming Corporation (NYSE:BYD) operates and owns 22 gaming properties across the nation, which includes a 50% interest in Atlantic City’s Borgata Hotel Casino & Spa. However, Boy Gaming recently agreed to sell its 50% equity interest in Marina District Development Holding Company LLC, the parent company of Borgata Hotel Casino & Spa, to MGM Resorts International (NYSE:MGM). Rehan Jaffer’s H Partners Management owns 5.50 million shares of Boyd Gaming Corporation (NYSE:BYD) as of March 31.
The next page of this insider trading article will digest the insider trading activity recently observed at three other companies.