Intel Corporation (INTC) and PepsiCo Inc. (PEP) Among Companies with Notable Insider Selling Activity

Although no one knows how many investors pay close attention to insider trading behavior when making investment decisions, there is good reason to believe that a high number of retail investors examine this activity as part of their stock analysis process. It is generally believed that executives and Board members usually sell shares of their companies when they see signs of trouble ahead, but this line of thought seems to be quite outdated. Insider trading watchers should keep in mind that most corporate insiders receive stock-based compensation as part of their compensation packages, which is why insiders sometimes sell shares for personal needs, without taking into account how undervalued or overvalued their companies’ shares are. As most insider sales related to freshly-exercised stock options or incumbent personal needs are conducted under pre-arranged trading plans, investors should mostly look for spur-of-the-moment insider transactions, which are solely the types of trades we report on when covering insider trading activity. With that in mind, Insider Monkey processed numerous Form 4 filings submitted with the SEC on Friday and identified three companies with noteworthy insider sales.

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 imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).

Intel Corporation Chairman Sells Massive Block of Shares

Intel Corporation (NASDAQ:INTC) had one of its most influential insiders sell shares this past week. Chairman Andy D. Bryant sold 185,740 shares on Thursday at prices varying from $31.93 to $32.05 per share, cutting his direct ownership stake to 386,731 shares. Mr. Bryant also holds an indirect ownership stake of 24,383 shares, which is held by a family trust fund.

The chipmaker is the worst performing stock in the Dow Jones Industrial Index thus far in 2016, so the recent insider selling at the company is not promising at all. Intel’s shares are 8% in the red year-to-date and are down by 3% over the past 12 months. The company’s disappointing first quarter earnings report released at the beginning of last week was overshadowed by a restructuring initiative that involves the reduction of up to 12,000 positions by mid-2017, which represents roughly 11% of the company’s current workforce. The freshly-announced headcount reduction is part of Intel Corporation (NASDAQ:INTC)’s transition towards the cloud and Internet of Things from the fast-declining PC market. Intel dominates the PC market, but fresh statistics show that global PC shipments declined by 11.5% year-over-year in the first quarter of this year. The company anticipates the PC market to decline by a further high-single-digits in 2016, so Intel’s data center and Internet of Things businesses are seen as the primary growth pillars in the years ahead. The company anticipates revenue growth in the mid-single-digits in 2016, down from its previous outlook of mid-to-high-single-digit growth.

Shares of Intel are currently changing hands at around 12.1-times expected earnings, below the forward P/E multiple of 14.3 for the Semiconductors sector. The hedge fund sentiment towards the chipmaker increased in the December quarter, as the number of funds tracked by Insider Monkey with stakes in Intel increased to 56 from 45 quarter-over-quarter. Ken Fisher’s Fisher Asset Management owns 19.63 million shares of Intel Corporation (NASDAQ:INTC) as of March 31.

The concluding pages of this article discuss the insider selling registered at Tile Shop Hldgs Inc. (NASDAQ:TTS) and PepsiCo Inc. (NYSE:PEP).

This Tile Retailer’s Chairman Also Offloaded Large Amount of Shares

Tile Shop Hldgs Inc. (NASDAQ:TTS) saw one of its Board members unload a sizable block of shares last week. Chairman William E. Watts discarded 83,781 shares on Wednesday at prices that ranged from $18.00 to $18.82 per share, which cut his ownership to 148,327 shares. This ownership stake also includes 18,012 shares of restricted stock granted pursuant to the company’s 2012 Omnibus Award Plan.

This massive insider sale comes after the tile retailer released a stronger-than-expected earnings report last week, which sent shares soaring. The company’s shares have gained 11% year-to-date and over 40% since March 8, so the company’s strong stock performance in recent weeks seems to serve as the most legitimate reason behind the Chairman’s transaction. Tile Shop’s net sales for the first quarter of this year were $84.71 million, an increase of 16.1% year-over-year due to comparable-store sales growth of 13.2% and incremental net sales of approximately $2.1 million from stores not included in the comparable-store base. First quarter net income climbed to $6.76 million from $3.66 million reported a year earlier. Tile Shop also raised its full-year revenue guidance to the range of $320 million-to-$329 million from the previous guidance of $312 million-to-$325 million.

Meanwhile, Tile Shop’s shares are currently trading at a hefty forward P/E ratio of 33.6, which is significantly above the ratio of 20.1 for the Home Improvement sector. There were 18 hedge funds tracked by Insider Monkey with stakes in the tile retailer at the end of December, which amassed nearly 15% of the company’s outstanding shares. Charles Paquelet’s Skylands Capital cuts its position in Tile Shop Hldgs Inc. (NASDAQ:TTS) by 7% during the January-to-March quarter to 743,500 shares.

PepsiCo Registers Insider Selling Activity Last Week

PepsiCo Inc. (NYSE:PEP) had not seen any insiders buy or sell shares for several months until last week. Cynthia M. Trudell, Chief Human Resources Officer and Executive Vice President of Human Resources, sold 8,000 shares on Wednesday for $104.23 each, trimming her holding to 39,592 shares.

PepsiCo’s shares have increased by 8% in the past 12 months and are currently trading slightly below their 52-week high of $105.77 reached earlier this month. The recent insider selling comes after the snack and beverage giant released its first quarter earnings report, which showed that the company’s North American beverage volume increased by 1% year-over-year due to a 7% increase in non-carbonated beverage volume. The non-carbonated beverage volume increase was driven by double-digit growth in PepsiCo’s water portfolio, along with mid-single-digit growth in Gatorade sports drinks and double-digit growth in Lipton ready-to-drink teas. Thus, it appears that the company has been successful in finding new beverages to compensate for declining cola sales.

However, analysts and investors might be worried about the company’s current valuation, as investors have turned their attention to defensive income stocks such as PepsiCo amid increased broader market volatility and uncertainty. PepsiCo boasts a dividend yield of 2.75%, while its 74% dividend payout ratio for 2016 suggests that the snack and beverage company will have to keep improving bottom-line figures to maintain its Dividend King title. Shares of PepsiCo are priced at 20.0-times expected earnings, above the forward P/E multiple of 17.8 for the S&P 500 gauge. Ken Fisher’s Fisher Asset Management had 5.36 million shares of PepsiCo Inc. (NYSE:PEP) in its equity portfolio at the end of March.

Disclosure: None