Most investors would agree that tracking insider trading activity should play an important role in one’s stock selection and analysis process. At the end of the day, executives and directors have more in-depth knowledge and up-to-date information on how their companies are performing and how they are likely to perform in the future. Of course, there is no corporate insider that could accurately tell you how undervalued or overvalued his or her company’s shares are, but insiders do have a better understanding of where their companies are heading. It is also commonly known that insiders sell shares for numerous reasons that may not be related to their companies’ future prospects and intrinsic value, so while not a lot of weight can be put on insider sales, this type of activity should not be overlooked by any means. Insider sales may occasionally suggest that insiders do not expect any significant positive developments at their companies in the near future. The concept of opportunity cost can easily prove that the timing of insider sales may offer some insights about the future performance of certain companies. With this in mind, the following article will discuss the insider selling activity registered at three companies so far this week.
Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does besides providing high-quality articles. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
East West Bancorp Inc. (NASDAQ:EWBC) has witnessed two executives unload holdings this week, so let’s check out the recent insider sales of these executives. President and Chief Operating Officer Julia S. Gouw reported selling 75,000 shares on Monday at a weighted average sale price of $40.23, cutting her overall holdings to 149,115 shares. Douglas P. Krause, Secretary, Chief Risk Officer and Executive Vice President, discarded 10,000 shares on the same day at a weighted average price of $40.76 and currently holds a stake of 88,656 shares.
East West Bancorp Inc. (NASDAQ:EWBC) is the bank holding company for its wholly-owned subsidiary East West Bank, which aims to serve as the financial bridge between the United States and Greater China. The shares of East West are up by 9% for the year despite enduring a significant pullback in mid-August. The bank’s credit quality strengthened over the past several months, as its non-performing assets added up to $129.8 million as of September 30, down from $132.4 million as of December 31, 2014. East West received some attention from the hedge funds tracked by Insider Monkey during the third quarter in spite of its disappointing stock performance during the three-month period, as the number of smart money investors with stakes in the company climbed to 23 from 21 quarter-over-quarter. Jim Simons’ Renaissance Technologies added a 585,598-share stake in East West Bancorp Inc. (NASDAQ:EWBC) to its portfolio during the September quarter.