Any investor who has spent considerable time assessing the stock market knows that there is no approach that works every time, regardless of whether it is based on fundamentals or technicals. Nevertheless, there are some strategies, which, if followed with discipline over a long period of time, produces returns that are better than the returns generated by the overall market or indices. Among them is tracking insider activity, since insiders of a company generally have access to more information than other investors. Keeping that in mind, let’s proceed to dissecting three stocks, which have seen insider selling recently: ChannelAdvisor Corp (NYSE:ECOM), Endurance Specialty Holdings Ltd. (NYSE:ENH), and RadNet Inc. (NASDAQ:RDNT).
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 over 118% and beating the market by more than 60 percentage points.
Let’s start with North Carolina-based Software as a Service (SaaS) company, ChannelAdvisor Corp (NYSE:ECOM), in which Executive Chairman Scot M. Wingo sold 35,000 shares in multiple transactions between August 31 and September 2 at prices ranging from $11.21 to $11.37 per unit. After these transactions, Mr. Wingo owns almost 1.28 million shares of ChannelAdvisor Corp (NYSE:ECOM). The company’s stock hasn’t been able to rebound ever since it dropped by 50% in mid-January on the back of the company announcing that its revenues for the fourth quarter of 2014 will fall short of expectations and is currently trading down 47.5% year-to-date. The loss of $0.10 per share and revenue of $24.20 million it reported for the second quarter of 2015, beat analysts’ estimates of a loss of $0.29 per share on revenue of $21.69 million. During the April-June period, Billionaire David E. Shaw‘s D.E. Shaw reduced its stake in ChannelAdvisor Corp (NYSE:ECOM) by 34% to 105,209 shares.