The so-called insider trading anomaly could be viewed as one of the most profitable investment strategies in the past several decades or so. Generally, information represents a valuable commodity and corporate insiders have a great deal of information; insiders hold more useful and up-to-date information than do outsiders such as journalists, bloggers or even stock analysts.
Of course, insiders make mistakes on some occasions just like any other human beings; they may formulate the wrong assumptions or they cannot predict the effects of macroeconomics factors on their company’s operations. However, the probability of insiders coming to the wrong conclusion is much smaller when more than one insider come to the same conclusion: buy. This essentially means that corporate insiders should seek to identify clusters of insider buying, although groups of insiders buying shares in unison may come to the wrong conclusion on a very few occasions as well. For instance, flash-based data storage developer Violin Memory filed for bankruptcy protection last year after numerous insiders purchased shares throughout 2016 and 2015. The bottom line is that insider buying should not represent the sole indicator when deciding on whether to buy a company’s shares, but insider trading behavior should represent an important feature of one’s stock analysis process. Having this in mind, the following article will lay out a list of noteworthy insider transactions reported with the SEC on Monday.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.
Cluster of Insider Buying at Expanding Oil and Gas Producer
Let’s begin our discussion by analyzing a cluster of insider buying observed at WPX Energy Inc. (NYSE:WPX). To start with, President and Chief Executive Officer Richard E. Muncrief purchased 20,000 shares on Thursday at a price of $13.35 per share, lifting his overall holding to 732,481 shares. Lead independent director William G. Lowrie bought 5,000 shares on the same day for $13.35 each, a purchase that increased his ownership stake to 242,076 shares. Last but not least, Board member Kelt Kindick purchased a 10,000-share block on Thursday at $13.35 apiece. Mr. Kindick currently owns an aggregate of 103,626 shares following the recent purchase.
Earlier this year, the oil and gas producer announced an agreement to purchase assets in the Delaware basin for $775 million in an attempt to expand its position in the oil-rich Permian region. The assets generate around 6,500 barrels of oil equivalent per day from 23 producing wells, two drilled but uncompleted horizontal laterals, 18,100 net acres in several counties in Texas and 920 gross undeveloped locations in the geologic sweet spot of the Delaware Basin. WPX Energy Inc. (NYSE:WPX) said it would fund the deal through cash on hand and an equity offering, in which the insiders mentioned above also participated. The company’s shares have gained an impressive 269% in the past year. Clint Carlson’s Carlson Capital L.P. held 6.44 million shares of WPX Energy at the end of the September quarter.
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The next two pages of the article discuss fresh insider buying and selling witnessed at four other companies.