Insiders at these Companies Have no Fear of Further Turmoil

The U.S. stock markets finished in the green for the second consecutive session, suggesting that the rest of the year might be contending for investors. The Dow Jones Industrial Average closed 235.57 points in the green on Wednesday, while the Standard and Poor’s 500 Index gained slightly below 2%. In fact, all ten sectors in the benchmark closed higher yesterday. It is also worth pointing out that volatility is fading away, as the Chicago Board Options Exchange Volatility Index (VIX) dropped by 8.7% during the last trading session to 24.50. This is all good news for most stock market participants, but the risk of a longer-term downturn should not be overlooked. Even so, many corporate insiders have started to purchase more shares lately, pointing to the fact that some companies may be trading at a discount at the moment. In this article, we will discuss the insider buying activity at three companies: Agenus Inc. (NASDAQ:AGEN), Triangle Capital Corporation (NYSE:TCAP), and Southern Copper Corp. (NYSE:SCCO). Precisely, we will attempt to find out what might have driven these insiders to acquire shares, and possibly pinpoint some trading opportunities.

Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 118% over the ensuing 36 months, outperforming the S&P 500 Index by nearly 61 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.

Let’s begin our discussion by looking into the insider activity at Agenus Inc. (NASDAQ:AGEN). Garo H. Armen, Chairman and Chief Executive Officer, acquired 100,000 shares at a price of $5.03 per unit last Friday, boosting his stake to 1.41 million shares. The executive also owns 300,000 shares indirectly through a trust and 4,046 shares through Antigenics Holdings LLC, where he also serves as Chairman. At the same time, Chief Financial Officer Charles Evan Ballantyne reported purchasing a 10,000 share-stake on the same day for $5.05 per share. The shares of the immunotherapy company have been on a downfall over the past few months, after delivering a return of over 130% through mid-July. The recent sell-off in the biotech industry, caused by worries about political pressures on drug prices, has also hit the stock even more. However, the decline has not been propelled by any firm-specific catalysts, suggesting that the stock is highly likely to bounce back in the months ahead. Peter Kolchinsky’s RA Capital Management, a healthcare-focused investor, initiated a 1.6 million-share position in Agenus Inc. (NASDAQ:AGEN) during the June quarter.

Moving on to Triangle Capital Corporation (NYSE:TCAP), the provider of capital to lower middle market companies had three insiders buy stock this week. Director Simon B. Rich Jr. acquired 5,000 shares at $15.57 apiece and enlarged his holding to 64,114 shares. Sherwood H. Smith, another director on the Triangle’s Board, added 6,000 shares, acquired at a price of $16.04 per unit, to his position that now consists of 73,614 shares. Most importantly, the company’s co-founder, Chairman and CEO, Garland S. Tucker III, acquired 1,500 shares this Tuesday at $16.11 per share. Following the recent transaction, the executive holds 262,556 shares, along with an additional 32,587 shares owned by his spouse. Triangle Capital’s investment income during the latest quarter added up to $27.8 million, up from $24.9 million reported a year ago. This increase was achieved thanks to the company’s increase in portfolio debt investments over the past year. Therefore, given that Triangle has been successful in closing new deals with a number of companies recently, it is highly likely that it will deliver another strong quarter. However, the shares of Triangle have lost more than 18% since the start of 2015, so these insiders may not agree with the market on the “true” value of this company’s stock. Bill Miller’s Legg Mason Capital Management represents the largest shareholder of Triangle Capital Corporation (NYSE:TCAP) within our database, owning nearly 293,000 shares.

Finally, we will investigate the insider activity at Southern Copper Corp. (NYSE:SCCO), a mining company that produces copper, molybdenum, zinc and silver. Chairman German Larrea Mota Velasco purchased 27,400 shares at $25.75 apiece on Wednesday, and 122,600 shares for $25.87 each on Thursday. After these recent transactions, the chairman owns 2.07 million shares valued at $55.33 million. The slumping commodity prices have put some downward pressure on the performance of most miners, and Southern Copper is no exception. Specifically, the declining and volatile copper prices have impacted Southern’s stock performance throughout this year, along with the broader market sell-off. The shares of the mining company are slightly over 5% in the red this year, so the chairman might be seeking to profit from the weakness of the company’s shares. According to Financial Times, a copper mine planned by Southern Copper in Peru, Tía María, is on hold due to conflicts between the police and local protesters, who are concerned about the negative impact of the mine on the water supply in the region. Cliff Asness’ AQR Capital Management reported an ownership stake of slightly more than 414,000 shares in Southern Copper Corp. (NYSE:SCCO) in its latest 13F filing

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