While Securities and Exchange Commission rules require executives, directors and other insiders to report purchases or sales in their own company’s stock within two days, an accurate interpretation of insider trading data has become more complicated in recent years. That’s because of the increased usage of equity-based compensation, as well as the proliferation of pre-arranged trading plans. As more directors and executives sell shares under the so-called 10b5-1 plans, it is close to impossible to figure out the reasoning behind their moves, while stock-based compensation packages make it even harder to find out why corporate insiders might be selling shares. Meanwhile, insider buying activity has become more useful than ever, but one should still keep in mind that corporate insiders are susceptible to biases and errors like any other human being. However, they are in the best position to accurately evaluate the prospects and current conditions of their companies, which is why Insider Monkey keeps track of their moves on a daily basis. Our team processed the Form 4 filings submitted with the SEC on Wednesday and identified five companies with noteworthy insider trading transactions.
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).
Biopharmaceutical Company’s Executive Buys Big
The Medicines Company (NASDAQ:MDCO)’s Chief Corporate Development Officer and Executive Vice President, Christopher T. Cox, purchased a new stake of 53,340 shares on Tuesday, of which 26,340 shares are held indirectly through an account to which Mr. Cox’s immediate family has a pecuniary interest. The shares were purchased at prices that ranged between $36.46 and $38.02 per share.
The global biopharmaceutical company, whose main pillar of growth in recent years was Angiomax (bivalirudin), has seen its market value gain nearly 3% since the beginning of the year. The Medicines Company (NASDAQ:MDCO)’s net product revenue from sales of Angiomax was $16.9 million for the first three months of 2016, a monumental decrease of $83.8 million relative to the same period of the previous year. The massive decline in Angiomax sales was primarily driven by strong competition from generic versions of bivalirudin after the company lost market exclusivity for the drug in the U.S and Europe last summer. Roberto Mignone’s Bridger Management had 3.10 million shares of The Medicines Company (NASDAQ:MDCO) in its pool of holdings at the end of March.
Diamond Jeweler Witnesses Increased Insider Buying Amid Bearish Report
Our database shows that Signet Jewelers Ltd. (NYSE:SIG) had not registered any insider buying activity since early 2012 until this week. Chief Executive Officer Mark S. Light snapped up 2,897 shares on Tuesday at a cost of $86.22 per share, lifting his overall holding to 85,395 shares. Moreover, Board member H. Todd Stitzer purchased 3,480 shares on the very same day at a price tag of $86.25 per share. After the recent purchase, Mr. Stitzer currently owns 10,852 shares of Signet.
The insider buying activity comes shortly after Grant’s Interest Observer investment newsletter raised concerns about the credit operations of the world’s largest retailer of diamond jewelry, as well as referencing a media story about customers complaining that their premium diamonds had been replaced with cheaper, lesser-quality substitutes. In a fresh statement, Signet Jewelers Ltd. (NYSE:SIG) rebuffed the allegations saying that “we strongly object to recent allegations on social media…that our team members systematically mishandle customers’ jewelry repairs or engage in diamond swapping.” Signet Jewelers shares have plunged by 28% since the start of 2016. Keith Meister’s Corvex Capital owns 5.93 million shares of Signet Jewelers Ltd. (NYSE:SIG) as of March 31.
On the next page of this article we’ll discuss the insider trading activity registered at three other companies.