Insider Buying Volume Hitting Historic Lows Should Not Worry Investors; Noteworthy Insider Transactions at 5 Companies

A recent article published by Bloomberg says that the number of corporate insiders, namely officers and directors, purchasing shares of their companies decreased by 44% from a year ago, to 316. This represents the lowest monthly total ever, according to data compiled by The Washington Service and Bloomberg that stretches back to 1988. On the other hand, a total of 1,399 corporate insiders sold shares of their companies in July, with sellers outnumbering buyers at a rate that has been exceeded only on two other occasions.

Is this data worrisome? Of course, heavy insider selling and muted insider buying activity might spook even the most experienced investors. However, the July slowdown in insider buying activity should not worry investors too much. The combination of an earnings-heavy July and U.S. equities surging to new all-time highs clearly explains the massive drop in insider buying. It is known that corporate insiders are usually reluctant to buy shares of their own companies when stock benchmarks trade near all-time highs, but earnings-heavy periods put even more pressure on insider buying as happened in July. So the overall picture may not be as grim as others depict it. With that in mind, the following article will discuss a set of noteworthy insider transactions reported with the SEC on Thursday.

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).

Insider Buys Shares of Air Logistics Provider Tied with Amazon.com

Atlas Air Worldwide Holdings Inc. (NASDAQ:AAWW) was one of the few companies that had an insider report a purchase of their company’s stock with the SEC on Thursday. Board member John K. Wulff bought 10,000 shares on Wednesday at prices ranging from $34.84 to $35.20 per share, doubling his ownership to exactly 20,000 shares.

The provider of outsourced aircraft and aviation operating services has seen the value of its stock decline by 14% since the beginning of the year. In May, Atlas Air Worldwide Holdings Inc. (NASDAQ:AAWW) unveiled a new partnership with e-commerce giant Amazon.com Inc. (NASDAQ:AMZN) under which the air logistics provider will use 20 Boeing 767’s to provide support for Amazon’s deliveries. The Seattle-based internet retailer has been busy bringing its delivery services under its own umbrella and moving away from third-party delivery companies such as FedEx and UPS. Atlas Air is set to be one of the main beneficiaries of this transition, with the company anticipating the placement of its first aircraft into service for Amazon during the current quarter. Earlier this year, Atlas Air also acquired privately-held air cargo firm Southern Air Holdings Inc. for around $110 million. Ken Fisher’s Fisher Asset Management reported ownership of 1.21 million shares of Atlas Air Worldwide Holdings Inc. (NASDAQ:AAWW) through the current round of 13F filings.

The second page of this article will list two companies that recently registered insider buying, while the final page of the article will reveal two companies with fresh insider selling.

Freshly-Appointed Board Member of U.S. Distributor of Roofing Materials Buys Shares

Beacon Roofing Supply Inc. (NASDAQ:BECN) also saw a member of its Board purchase some shares this week. Freshly-appointed Director Robert M. McLaughlin snapped up a new stake of 6,000 shares on Tuesday at a price tag of $45.79 each.

The shares of the second-largest distributor of residential and non-residential roofing materials in the United States and Canada are 11% in the green thus far in 2016. Last October, Beacon Roofing Supply Inc. (NASDAQ:BECN) completed its $1.2 billion-acquisition of roofing products distributor Roofing Supply Group, a deal that strengthened the acquirer’s position as the largest publicly-traded roofing materials distributor in the nation. As a result, the company’s net sales for the three months that ended June 30 increased to $1.15 billion from $718.21 million posted a year earlier. However, Beacon Roofing Supply’s existing market sales grew by an impressive 8.7% year-over-year, partially reflecting increased demand in residential, non-residential and complementary products groups, as well as strong storm activity across the Southwestern U.S. this year. Eduardo Abush’s Waterfront Capital Partners added a 330,129-share position in Beacon Roofing Supply Inc. (NASDAQ:BECN) to its portfolio during the June quarter.

Insider Buying Registered at Mortgage Insurer Amid Takeover Rumors

Radian Group Inc. (NYSE:RDN) had a member of its executive team pile up some shares earlier this week. Derek V. Brummer, Chief Risk Officer and Executive Vice President, purchased 1,000 shares for $12.92 each and 15,000 shares at $12.87 apiece on Wednesday, lifting his overall holding to 41,853 shares.

The provider of mortgage insurance, products and services to the real estate and mortgage finance industries has lost 3% of its market cap since the start of the year. The revitalized housing market and more rigorous lending standards put in place after the painful financial crisis have lightened the prospects for mortgage insurers such as Radian Group Inc. (NYSE:RDN). Barclays analysts anticipate “a supercycle for mortgage credit that seems unlikely to be derailed by a recession,” so Radian shares appear to have more room to run in the years ahead. The company’s CEO S. A. Ibrahim recently announced that he will step down from his role at the end of 2017. While the company’s Board is currently searching for a successor, it is rumored that mortgage insurer Essent Group Ltd (NYSE:ESNT) is interested in inking a merger deal with Radian. Royce & Associates, founded by Chuck Royce, acquired a new stake of 130,000 shares of Radian Group Inc. (NYSE:RDN) during the June quarter.

The final page of the article will discuss the fresh insider selling witnessed at two other companies.

Insiders Offload Shares of Medical Equipment Maker

ResMed Inc. (NYSE:RMD) has witnessed increased insider selling over the past several trading sessions, but most of that selling was related to freshly-exercised stock options. Despite that, there were some noteworthy spur-of-the-moment insider sales unconnected to stock options as well. Chief Financial Officer Brett A. Sandercock discarded 35,000 shares on Thursday at prices between $70.22 and $70.79 per share, cutting his overall holding to 51,084 shares.

The shares of the developer, manufacturer and distributor of medial equipment for treating, diagnosing and managing sleep-disordered breathing and other respiratory disorders have ballooned by 31% since the beginning of the year. ResMed Inc. (NYSE:RMD) reported revenue of $1.8 billion for its fiscal year 2016 ended June 30, up by 10% year-over-year and by 13% on a constant currency basis. The company’s bottom-line was flat year-over-year at $352.4 million. ResMed’s Board recently approved a quarterly dividend of $0.33 per share, which marked an increase of 10% from the previously-paid dividend. David Harding’s Winton Capital Management owns 98,708 shares of ResMed Inc. (NYSE:RMD) as of the end of the second quarter.

Some Insider Selling Registered at Well-Known Distributor of Energy Drinks

Monster Beverage Corporation (NASDAQ:MNST) also witnessed a notable insider sale this week. Thomas J. Kelly, Senior Vice President of Monster Energy Co., jettisoned 10,000 shares on Tuesday at prices that fell between $159.49 and $159.83 per share. After the recent sale, Mr. Kelly currently owns 5,717 shares.

The developer and distributor of energy drink beverages and concentrates for energy drink beverages has seen its market cap jump by 8% in 2016. Soon after releasing a stronger than expected second quarter earnings report, analysts at BMO Capital Markets upped their price target on Monster Beverage Corporation (NASDAQ:MNST) by $5 to $165 and reiterated their ‘Outperform’ rating on the stock, saying that the company has “one of the most attractive growth stories in the U.S. staples sector” due to strong sales growth both domestically and internationally, a “pristine” balance sheet, a strengthening relationship with The Coca-Cola Co (NYSE:KO), and a strong management team. Robert Bishop’s Impala Asset Management increased its Monster Beverage Corporation (NASDAQ:MNST) holding by 58% during the second quarter to 54,016 shares.

Disclosure: None