Heavy Insider Selling at Pioneer Natural Resources (PXD), BNY Mellon (BK), Graphic Packaging (GPK)

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The dollar value of insider selling in April was the second-lowest monthly total in the past 12 months, which may serve as a promising indicator for some investors. Heavy insider selling can serve as an alarming trend, as it may encourage outside investors to start selling shares as well. Insider trading watchers should bear in mind who is doing the selling, considering that Form 4 filings disclosing insider buying and selling can be submitted by top-tier executives, directors, or even major shareholders such as hedge funds and activists. Therefore, a Chief Executive Officer unloading shares may serve as a more alarming signal than a hedge fund manager, which is why we don’t discuss insider trading involving large shareholders. With that in mind, let’s proceed with an analysis of three noteworthy insider sales reported to 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 Paperboard Packaging Solutions Provider’s Chairman Unloads Sizable Block of Shares

Graphic Packaging Holding Company (NYSE:GPK) has recorded a high volume of insider selling in the past several months, so let’s take a glimpse at the most recent activity. Chairman David W. Scheible, former Chief Executive Officer of Graphic Packaging, sold 100,000 shares on Monday at prices that ranged from $13.14 to $13.24 per share, cutting his holding to 1.07 million shares. Mr. Scheible sold an additional 200,000 shares in March at prices ranging from $12.58 to $12.74 per share. The provider of paperboard packaging solutions has seen its shares advance by a whopping 142% in the past five years, so it may be a wise decision for long-term employees such as Mr. Scheible to sell some shares and diversify.

Nonetheless, Graphic Packaging Holding Company (NYSE:GPK)’s stock has not performed particularly well in the past 12 months, losing 9% of its value. The company has completed a series of acquisitions over the past several months in an attempt to expand the reach of its operations across the globe. Most recently, the company completed its previously-announced acquisition of Colorpak, a folding carton supplier in Australia and New Zealand. Colorpak operates three folding carton facilities that convert paperboard into folding cartons. Moreover, Graphic Packaging also acquired G-Box in early January, which involved the acquisition of two folding carton converting facilities in Mexico. In February, the company acquired folding carton manufacturer Walter G. Anderson Inc., which operated two sheet-fed folding carton converting facilities in the United States.

Graphic Packaging’s shares are currently trading at 14.5-times analysts’ consensus 2017 EPS estimate, slightly below the forward P/E multiple of 17.7 for the S&P 500 Index. There were a total of 41 hedge funds tracked by Insider Monkey with stakes in the company at the end of December, which amassed roughly 28% of its outstanding shares. Iridian Asset Management, founded by David Cohen and Harold Levy, had 27.37 million shares of Graphic Packaging Holding Company (NYSE:GPK) in its equity portfolio at the end of 2015.

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The next two pages of this article discuss the recent insider sales registered at Pioneer Natural Resources (NYSE:PXD) and Bank of New York Mellon Corp (NYSE:BK).

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