All major U.S stock indexes posted big gains on Tuesday, after fresh data alleviated worries and concerns about the strength of the U.S economy. The freshly-revealed data suggests that market conditions in the real world are not as unhealthy as most investors and analysts previously anticipated. The surge in insider buying activity coupled with a substantial decline in insider selling throughout January and February were shouting just that; that the U.S economy was not as weak as market participants seemed to believe, based on the market’s bear run during the first two months of the year, so broader shifts in insider trading behavior may be very informative on some occasions. Corporate insiders tend to act as contrarian investors, which means that they buy shares when nobody wants them and sell shares when everyone wants them. Although it is true that some insider sales may not be indicative of possible poor stock performance, investors should keep a close eye on this type of activity as well, three examples of which we’ll look at in this article.
Through extensive research, we have determined that the due diligence that the investors in our database employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also shown that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).
Let’s kick off our investigation by analyzing the recent insider selling activity at PPG Industries Inc. (NYSE:PPG), which saw its top executive sell a sizable block of shares last week. Chairman and Chief Executive Officer Charles E. Bunch unloaded 46,286 shares on Friday at prices that ranged from $97.90 to $98.43 per share, trimming his direct ownership stake to 732,911 shares. The Executive Chairman also holds an indirect ownership stake of 24,175 shares, which is held through his 401(k) plan.
The shares of the manufacturer of coatings, specialty materials and glass products are down by 15% over the past 12 months, though they are trading in positive territory year-to-date. Earlier this week, aftermarket auto parts supplier LKQ Corporation (NASDAQ:LKQ) announced an agreement to purchase Pittsburgh Glass Works LLC from PPG and private equity firm Kohlberg & Co. LLC. PPG Industries Inc. (NYSE:PPG) has approximately 40% ownership interest in Pittsburgh Glass Works, with the freshly-inked deal completing PPG’s transition away from the automotive glass industry. Instead, PPG plans on strengthening its market position in paint, coatings and specialty materials. The $635 million-deal is anticipated to close in the second quarter of 2016.
PPG Industries generated net sales of $15.33 billion in 2015, down from $15.36 billion generated in 2014. The decrease was mainly attributable to foreign currency headwinds, which were in turn offset by new sales from acquired businesses and higher volumes. PPG is known as a dividend aristocrat, as it has increased its annual dividend payments for 43 consecutive years. The company pays out an annual dividend of $4.29 per share, which denotes a current dividend yield of 1.49%. Meanwhile, the stock is currently trading at 14.39-times expected fiscal year 2017 earnings, below the forward P/E ratio of 18.90 for the Specialty Chemicals industry. The number of hedge funds in our system with stakes in PPG dropped to 43 from 51 during the fourth quarter of 2015. Ken Griffin’s Citadel Advisors LLC owns 3.17 million shares of PPG Industries Inc. (NYSE:PPG) as of December 31.