Heavy insider buying is usually interpreted as a bullish signal within the investment community because there’s only one reason corporate insiders are buying shares in their own companies (okay, two reasons – some corporate insiders are required to purchase securities to meet stock ownership guidelines). Unlike many indicators based on historical data, insider buying serves as a forward-looking indicator. Most of the time, insider purchases show that corporate insiders believe their company’s stock is worth much more than the price tag set by the invisible hand of Mr. Market and they tend to be accurate on most occasions.
Past research, analysts and insider trading experts suggest that clusters of insider buying are significantly more informative than single buys. A herd of insiders buying shares is a much better signal than a “lone wolf” who could be wrong. However, it’s not too hard to find securities in which corporate insiders made buys at significantly higher prices than current ones, which means insiders could also misjudge the market or their company’s fundamentals. It does not seem to be a great idea to put emphasis on insider trading alone, as this practice could make investors overlook fundamental flaws and warning signs. So one could easily arrive at the conclusion that investors should attempt to incorporate insider trading metrics into their own stock selection and analysis process rather than trade on insider trading alone. With that in mind, let’s discuss a set of noteworthy insider transactions reported with the SEC on Monday.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 39.7%, topping the 24.1% gain registered by S&P 500 ETFs. Insider Monkey’s enhanced small-cap strategy registered gains of more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points in the last 4.5 years (see the details here).
Insiders at Convenience Store Operators Keep Buying Shares
After two insiders at Murphy USA Inc. (NYSE:MUSA) purchased shares at the beginning of the previous week, an additional insider opted for boosting his equity stake on Friday. Board member David B. Miller snapped up 15,298 shares on Friday at a price tag of $65.37 each. Mr. Miller currently owns a total of 35,298 shares after the purchase.
The shares of the marketer of retail motor fuel products and convenience merchandise are 5% in the green so far in 2017. The bulk of insider buying comes after Murphy USA Inc. (NYSE:MUSA) released its financial results for the three and twelve months that ended December 31. The company’s net income rose to $221.5 million in 2016 from $176.3 million in 2015 despite operating in the weakest retail fuel margin environment since 2010. The jump in insider buying at Murphy USA is not necessarily surprising, especially when bearing in mind that the company’s shares are down by 13% in the past six months. Ken Griffin’s Citadel Advisors LLC reported owning around 131,000 shares of Murphy USA Inc. (NYSE:MUSA) through the 13F filing for the fourth quarter.
Follow Murphy Usa Inc. (NYSE:MUSA)
Follow Murphy Usa Inc. (NYSE:MUSA)
The discussion on the next page of the article revolves around some noteworthy insider buying at two other companies.