In a rather recent study on insider trading, several researchers from top-tier U.S. universities split insider trading into two groups: routine insider trading that does not convey meaningful information; and information-rich insider trading that contains strong predictive power. While only a small portion of the overall insider buying activity can be considered routine, most insider selling does not seem to convey meaningful information to the investment community. After all, most insider selling is driven by diversification or liquidity reasons, so insider trading watchers should be extremely careful when interpreting insider selling.
As mentioned above, a small portion of insider buying could be viewed as routine as well. Specifically, the insider purchases conducted by freshly-appointed board members or executives to meet stock ownership guidelines implemented by most publicly traded companies represent routine transactions. Turning our attention to the study mentioned above, the researches found that the routine trades were associated with zero abnormal returns, whereas the information-rich transactions, referred in the study as opportunistic, yielded value-weighted abnormal returns of 82 basis points per month. All in all, one conclusion that can be drawn from the study discussed above is that investors can use insider trading data and information to make better, smarter investment decisions. That being said, let’s have a look at a set of notable insider transactions reported with the SEC on Tuesday.
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CEO of Boutique Investment Bank Piles Up Shares
Let’s kick off our discussion by looking into the insider buying observed at PJT Partners Inc. (NYSE:PJT), where the most well-informed and influential executive purchased a great deal of shares this week. Chairman and CEO Paul J. Taubman snapped up 34,211 Class A shares on Monday at prices varying from $29.50 to $29.75 per share, along with an additional 789 Class A shares that were bought on Tuesday at a weighted average price of $29.65 per share. Following the recent transactions, Mr. Taubman currently owns an aggregate of 400,000 shares.
The advisory-focused investment bank has seen its market capitalization jump by 5% since the beginning of the year. PJT Partners Inc. (NYSE:PJT) reported total revenues of $121.3 million for the September quarter, a decrease of $26.0 million relative to the same period of the previous year. The decrease in the boutique investment bank’s top-line figure mainly reflects a decrease in advisory fees due to an overall drop in the size of transactions closed during the quarter. The decrease in strategic advisory activity was somewhat offset by a jump in restructuring and special situations activity. Israel Englander’s Millennium Management added a 230,520-share stake in PJT Partners Inc. (NYSE:PJT) to its portfolio of holdings during the third quarter.
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The next two pages of this article will discuss other insider transactions reported with the SEC on Tuesday.