Corporate insiders usually have two ways to buy or sell shares in their own companies. The first way is to buy or sell shares on the open market, while the second one is to conduct transactions under pre-arranged trading plans known as 10b5-1 plans. Most U.S. public companies have established trading windows for their insiders, which specify particular time periods when directors and executives can buy or sell shares in their own companies. Moreover, many companies appear to have blackout and quiet periods in place, so insider trading activity is extremely sluggish during earnings seasons. However, insider transactions conducted under pre-arranged trading plans are not affected by blackout or quiet periods, which seems to explain why the ratio of insider selling over insider buying is extremely high during earnings-heavy periods (insiders tend to sell shares by designing 10b5-1 plans and buy shares on the open market). With that in mind, let’s proceed with the discussion of spur-of-the-moment insider selling activity, which relates to the type of insider selling that is not conducted under trading plans, recently witnessed at three companies.
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This Home and Security Products Company Had Two Executives Sell Shares Lately
Fortune Brands Home & Security Inc. (NYSE:FBHS) has seen two top-tier executives unload shares in the past several days. To begin with, David Randich, President of MasterBrand Cabinets, sold 29,591 shares on Monday at prices that ranged from $57.00 to $57.42 per share, cutting his holding to 118,887 shares. Moreover, Chief Executive Officer Christopher J. Klein dumped 310,000 shares on Friday at prices varying from $57.00 to $58.09 per unit, after exercising 230,000 stock options at an exercise price of $12.30. After these transactions, Mr. Klein currently holds a direct ownership stake of 389,308 shares. The CEO sold an additional 80,000 shares on Friday at a weighted average price of $57.04, all of which were owned by trusts held for the benefit of Mr. Klein’s heirs.
The shares of the home and security products company are trading near their all-time high of $59.98 reached last week, after gaining 25% in the past 12 months. The aforementioned insider transaction comes shortly after Fortune Brands Home & Security Inc. (NYSE:FBHS) released its first-quarter earnings report, which revealed earnings per share (EPS) of $0.35 on net sales of $1.11 billion. This compares to EPS of $0.25 on net sales of $950.8 million reported for the same quarter of the prior year. Meanwhile, the management anticipates full-year 2016 sales growth in the range of 10% to 12%, primarily driven by the acquisition of manufacturer of kitchen and bathroom cabinetry Norcraft for $648.6 million in May 2015.
Several days before the release of the earnings report, analysts at Keybanc reiterated the ‘Overweight’ rating on Fortune Brands Home & Security and increased the price target to $64 from $56, citing “rising homeowners’ equity and increased ability to extract value from price-appreciated homes”. Murray Stahl’s Horizon Asset Management cut its stake in Fortune Brands Home & Security Inc. (NYSE:FBHS) by 14% during the March quarter to 33,604 shares.
Under Armour Witnessed High Insider Trading Activity on Sell Side
Under Armour Inc. (NYSE:UA) had several executives unload shares earlier this week, but some insider selling was related to freshly-exercised stock options. James H. Hardy, Executive Vice President of Global Operations, sold 32,500 Class A shares on Tuesday at prices that fell between $46.38 and $47.35 per share, cutting his ownership to 38,009 shares. Mr. Hardy also sold 32,500 Class C shares on the same day at prices that ranged from $43.89 to $44.80 per share, reducing the stake to 38,009 shares. Under Armour recently declared a stock dividend pursuant to which all holders of Class A shares received one share of non-voting Class C common stock for each share of Class A common stock, which had the same effect as a two-for-one stock split. Moreover, Chief Digital Officer Robin Thurston sold 17,140 Class A shares on Monday at a weighted average price of $46.47 and 17,140 Class C shares at an average price of $44.38, trimming his both Class A and Class C ownership stakes to 37,491 shares.
The developer, marketer and distributor of branded performance apparel, footwear and accessories has seen its market value gain almost 16% since the beginning of 2016. Just recently, the Baltimore-based athletic gear maker sealed a 10-year deal with the University of California to serve as the school’s shoe and apparel provider; a deal that will replace its more powerful rival Nike Inc. (NYSE:NKE). A little more than a week ago, Under Armour released its financial results for the first quarter of 2016, which followed several price target increases on the part of several financial hubs. Columbus Circle Investors, managed by Clifford G. Fox, owned 1.64 million shares of Under Armour Inc. (NYSE:UA) at the end of 2015.
Manufacturer of Packaged Products Had Executive Offload Massive Block of Shares
Crown Holdings Inc. (NYSE:CCK) also had one of its executives sell a voluminous block of shares earlier this week. Jozef Salaerts, President of the company’s Asia-Pacific Division, offloaded 20,399 shares on Monday at a weighted average price of $53.39, cutting his ownership to 111,008 shares.
Crown Holdings’ business operations primarily involves designing, manufacturing and marketing packaged products for consumer goods. Precisely, the company’s main products include steel and aluminum cans, glass bottles for beverage products and metal vacuum closers and caps. The aforementioned insider selling comes after Crown Holdings released its first-quarter earnings report, which showed net sales of $1.89 billion. This represents a decrease from nearly $2.00 billion generated in the first quarter of 2015, partly owing to an $85 million unfavorable currency translation. The company’s beverage can unit volume increased 7% year-on-year as consumers in emerging and developed markets continue to favor cans over other beverage packaging formats. As a result, Crown Holdings plans to expand capacity so as to meet the fast-increasing demand. Specifically, the company is currently developing a third beverage can plant in Cambodia and adding can end capability to one of its Cambodian beverage can plants.
Shares of Crown Holdings are up 6% year-to-date, after having gained 18% in the past three months alone. Meanwhile, the stock is priced at 12.7-times expected earnings, below the forward PE multiple of 17.8 for the companies included in the S&P 500 Index. Charles Paquelet’s Skylands Capital trimmed its stake in Crown Holdings Inc. (NYSE:CCK) by 28% during the January-March quarter to a mere 5,800 shares.