Homebuilder Beazer Homes USA Inc. (BZH), Leading U.S. Cinema Chain, and 3 Other Companies Register Noteworthy Insider Buying

Equity transactions by corporate insiders of public corporations have received a great deal of attention from regulators, scholars and investors over the years. Assuming that insiders’ purchases and sales are partially reflective of the private information they posses, the public disclosures of their trades can serve as very informative signals to the investment community.

Past research shows that insiders’ equity purchases tend to outperform broader market benchmarks, which is the primary reason why retail investors, hedge fund vehicles and the media in general keep tabs on insider trading activity. More importantly, several research papers also conclude that the overall trading behavior of corporate insiders across firms is correlated with aggregate stock returns. This means that insider transactions tend to be informative about current macro factors and economic conditions of a country or specific industry, even though insiders’ private information may be largely firm-specific. One study finds that insiders’ net purchases (purchases minus sales) and the ratio of insider purchases to the sum of insider purchases and sales aggregated by country and calendar quarter are positively correlated with the next-quarter stock return. Without further delay, let’s examine a set of insider purchases recently witnessed at five publicly-traded companies.

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).

Massive Insider Purchase of Diversified Homebuilder’s Shares

Beazer Homes USA Inc. (NYSE:BZH) was one of the five companies that witnessed noteworthy insider buying during the past several trading sessions. Non-Executive Chairman Stephen P. Zelnak Jr. purchased 50,000 shares on Monday at a price of $9.70 per share. After the recent transaction, Mr. Zelnak currently holds an ownership stake of 241,920 shares.

The market value of the diversified homebuilder has declined by 15% since the beginning of 2016. Even so, the company’s stock performance has been in recovery mode during the past several weeks, as Beazer Homes shares are up by almost 16% over the past month. Beazer Homes USA Inc. (NYSE:BZH)’s new-home closings increased to 1,364 in the three-month period ended June 30, from 1,293 recorded for the same period of the prior year. Meanwhile, the company’s average selling price increased by 4.0% year-over-year. As a result, the homebuilding revenue generated by Beazer Homes during the three months ended June 30 grew by 9.7% year-over-year to $451 million. However, the company ended the latest quarter with a backlog of 2,426 units, down by 12.2% year-over-year due to a 2.2% decline in new order activity and higher year-over-year closings. Royce & Associates, founded by Chuck Royce, upped its position in Beazer Homes USA Inc. (NYSE:BZH) by 11% during the second quarter,  to 1.42 million shares.

The next two pages of this insider trading article will discuss the noteworthy insider purchases of four other companies’ shares.

CEO of Leading Theater Chain Buys Shares

The man in charge of AMC Entertainment Holdings Inc. (NYSE:AMC) piled up some shares of the company during the first trading session of this week. President and CEO Adam M. Aron filed Monday to disclose the purchase of 10,000 Class A shares at prices ranging from $28.74 to $28.85 per share. Following the purchase, Mr. Aron currently owns 20,000 Class A shares of AMC.

In early-March, the second-largest U.S. theater chain, which is controlled by Chinese billionaire Wang Jianlin, agreed to acquire Carmike Cinemas Inc. (NASDAQ:CKEC) for $30 per share in cash, a deal that would create the world’s largest cinema chain. However, several shareholders of Carmike said that the $30 per share offer was not enough, leading AMC Entertainment Holdings Inc. (NYSE:AMC) to sweeten its buyout offer to persuade those holdout shareholders to accept the takeover. Under the improved offer, Carmike investors can choose between receiving $33.06 in cash or 1.0919 shares of AMC’s Class A shares. Driehaus Capital Management, one of the shareholders who opposed the initial $30 per share-offer, recently announced that it would vote in favor of the revised offer. AMC shares have gained 20% thus far in 2016. Thomas Bailard’s Bailard Inc. owns 9,000 shares of AMC Entertainment Holdings Inc. (NYSE:AMC) as of June 30.

Cluster of Insider Buying at Metal Packaging Company

Ball Corporation (NYSE:BLL) witnessed a cluster of insider buying this week, as three different insiders reported purchasing shares on Monday. To begin with, Director Hanno C. Fiedler, former Chairman and CEO of Ball Packaging Europe, snapped up 3,000 shares on Monday at a price tag of $79.32 each, lifting his overall holding to 127,418 shares. Robert W. Alspaugh, elected to the company’s Board of Directors in January 2008, purchased a new stake of 3,000 shares on the same day at a weighted average price of $79.27 per share. Last but not least, Board member Theodore M. Solso also bought 3,000 shares at prices that fell between $79.96 and $79.99 per share, all of which are held by the Solso Revocable Trust that currently holds 10,308 shares. Mr. Solso also holds a direct ownership stake of 30,604 shares.

The shares of the supplier of metal packaging to the beverage, food, personal care, and household products industries have jumped by 10% since the start of the year. Just recently, analysts at Jefferies added Ball Corporation (NYSE:BLL) to their Franchise Picks list, which contains the highest conviction Buy-rated stock ideas of the firm. Ball Corporation recently completed its $6.1 billion-acquisition of London-based metal beverage can maker Rexam PLC, which resulted in the creation of the largest manufacturer of beverage cans in the world. Stephen J. Errico’s Locust Wood Capital Advisers reported owning 358,173 shares of Ball Corporation (NYSE:BLL) in its 13F for the June quarter.

The final page of this article will briefly discuss several insider purchases registered at two other companies.

Building Supplier Registers Some Insider Buying

Headwaters Inc. (NYSE:HW) recently registered the first insider purchase of its shares in 2016. Board member R. Sam Christensen snatched up 5,706 shares on Monday at $19.05 apiece, all of which are held through a limited liability company. After the recent purchase, Mr. Christensen owns 27,671 Headwaters shares through the LLC.

The building supplier has seen the value of its shares increase by 13% since the beginning of January. Headwaters Inc. (NYSE:HW)’s consolidated revenue for the three-month period ended June 30 grew by 8% year-over-year to $262.5 million despite experiencing adverse weather conditions in a few markets, including heavy rain in the Texas and Gulf regions. The underlying fundamentals of the company’s end-markets continue to strengthen, as single family housing starts are growing modestly. Similarly, many repair and remodel markets across the nation have been gradually improving as well. Charles Paquelet’s Skylands Capital has 111,250 shares of Headwaters Inc. (NYSE:HW) among its holdings as of the end of the second quarter.

Diversified Manufacturing Company’s Freshly-Appointed CEO Initiates New Stake

TriMas Corp (NASDAQ:TRS) saw its freshly-appointed President and CEO acquire a new stake in the company last Thursday. Thomas A. Amato snapped up a new stake of 6,000 shares for $17.81 each on that day, followed by the purchase of an additional 2,000 shares on Friday at $17.90 apiece.

The shares of the global manufacturer and distributor of products for commercial, industrial and consumer markets are down by approximately 1% so far in 2016. TriMas Corp (NASDAQ:TRS) reported second quarter net sales from continuing operations of $203.3 million, a decrease of 9.6% year-over-year due to weakness in the energy-facing end markets, industrial softness, lower aerospace distributor sales, and currency exchange headwinds. Nonetheless, the company managed to improve its bottom-line by implementing a series of cost reduction and productivity initiatives. Richard S. Pzena’s Pzena Investment Management owned approximately 997,000 shares of TriMas Corp (NASDAQ:TRS) at the end of June.

Disclosure: None