Insider trading behavior should constitute an important piece of data in one’s security analysis process, as past research shows that insider actions tend to offer an accurate reflection of the future prospects of companies, industries or even stock markets in general. Intuitively this makes perfect sense. After all, corporate insiders possess a broad set of skills and characteristics that describe the “value-oriented” type of investors.
Some of these skills and characteristics include: an extensive knowledge and understanding of their companies and industries; the tendency to employ a contrarian approach to investing; and the preponderance to maintain a long term perspective. Hence, insider trading activity, especially insider buying, represents a strong source of information for long-term-oriented investors. As legendary investor Peter Lynch once said, corporate insiders may sell shares of their own companies for a variety of reasons such as estate planning or diversification benefits, but there is only one reason they buy – they think the price is going up. Insider Monkey identified a set of noteworthy insider transactions reported with the SEC on Friday – transactions covered throughout the next three pages of this insider trading article.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Cluster of Insider Buying at Macquarie Infrastructure After Hedgeye Recommends Shorting the Stock
Let’s kick off our discussion by looking at a cluster of insider buying at Macquarie Infrastructure Corp (NYSE:MIC), where five insiders purchased shares last week. To start with, Jay A. Davis, the head of the investor relations team for Macquarie Infrastructure and Real Assets, bought 1,000 shares on Friday at $74.15 apiece, lifting his overall holding to 8,331 shares. General Counsel Michael Kernan purchased a new stake of 1,000 shares on the same day for $74.15 each. Chief Financial Officer Liam Stewart snapped up a 2,500-share block at a price of $74.15 per share, a block held by Jayandell Holdings 1 LLLP. Mr. Stewart also holds a direct ownership stake of 281 shares. Chairman Martin Stanley snatched up 4,000 shares on Friday for $74.15 each, doubling his ownership stake to 8,000 shares. Last but not least, Chief Executive Officer James Hooke bought 15,000 shares on the same day, boosting his holding to 71,576 shares.
As there is a story behind each insider purchase on most occasions, let’s focus our attention on what might have triggered the jump in insider buying at the energy and transportation infrastructure conglomerate. The insider buying discussed above comes after Kevin Kaiser, a managing director at Hedgeye Risk Management, recommended shorting Macquarie Infrastructure Corp (NYSE:MIC), sending the shares plummeting. The shares of Macquarie Infrastructure should be worth $40-to-$50 according to Kaiser, well-known for his past success at identifying short targets. Macquarie Infrastructure’s shares are down 4% year-to-date. Bernard Selz’s Selz Capital LLC reported owning 1.01 million shares of Macquarie Infrastructure Corp (NYSE:MIC) through the latest round of 13Fs.
Let’s head to the next two pages of this article, where you can find noteworthy insider buying and selling at four other companies.
Numerous Insiders at Commercial Bank Buy Shares Via Public Offering
More than ten insiders at Howard Bancorp Inc. (NASDAQ:HBMD) purchased shares last week through a public offering, so let’s have a brief look at some individual purchases. Board member Robert J. Hartson bought 10,000 shares on Thursday for $15.00 each, lifting his stake to 163,768 shares. Richard G. Arnold, a director of Howard Bancorp since 2005, added 16,000 shares to his holding, which currently comprises 124,173 shares. President and CEO Mary Ann Scully snapped up 2,000 shares on Thursday. Ms. Scully owns an aggregate of 129,020 shares after the purchase.
The parent company of Howard Bank, a Maryland-chartered trust company operating as a commercial bank, raised gross proceeds of $41.4 million from the offering, which were said to be used for general corporate purposes. Specifically, Howard Bancorp Inc. (NASDAQ:HBMD) plans to use the money to support its lending and investing activities, repay debt, as well as fund acquisitions of other institutions or branches if such opportunities become available. Howard Bank operates a commercial banking business via 13 branches located throughout the Greater Baltimore Metropolitan Area. The shares of Howard Bancorp are up 44% in the past year. Emanuel J. Friedman’s EJF Capital LLC owned around 680,000 shares of Howard Bancorp Inc. (NASDAQ:HBMD) at the end of September.
Multiple Insiders at Low-Priced Biopharmaceutical Company Purchase Shares
Seven corporate insiders at Sorrento Therapeutics Inc. (NASDAQ:SRNE) piled up shares this past week, so this paragraph briefly discusses some of the most voluminous purchases. To start with, President and CEO Henry Ji purchased 20,000 shares on Friday at a price tag of $5.15 each, boosting his direct ownership stake to 37,776 shares. The co-founder of Sorrento Therapeutics also holds an indirect ownership stake of 2.05 million shares held in a family trust. Board member Jaisim Shah bought 10,000 shares on the same day at $5.15 apiece. Mr. Shah currently owns a total of 102,631 shares after the recent purchase. Jerome B. Zeldis, Chief Medical Officer and President of Clinical Development, acquired a new stake of 10,000 shares for $5.15 each.
The shares of the biopharmaceutical company are up a little less than 1% in the past year. Sorrento Therapeutics Inc. (NASDAQ:SRNE)’s main therapeutic focus is oncology, including the treatment of chronic cancer pain, though the company develops products for immunology and infectious diseases as well. The company’s revenues for the three months that ended September were $2.24 million, up from $1.10 million recorded a year ago. The increase mainly reflected license fees from a license agreement, partially offset by a decrease in activities under the company’s active grants. Leonard A. Potter’s Wildcat Capital Management was the equity holder of 2.80 million shares of Sorrento Therapeutics Inc. (NASDAQ:SRNE) on September 30.
The final page of this insider trading article discusses fresh insider selling at two well-known giants.
Spontaneous Insider Sale at the iPhone Maker Near 52-Week High
Although heavy pre-arranged insider selling at multinational giants such as Apple Inc. (NASDAQ:AAPL) is a normal occurrence, spur-of-the-moment sales could be seen as an anomaly. Spontaneous insider selling could mean insiders are desperate to trim their holdings while still possible and advantageous. Bruce Sewell, Apple’s General Counsel and Senior Vice President of Legal and Global Security, discarded 75,000 shares on Thursday at prices varying from $128.01 to $128.59 per share. Mr. Sewell, one of the highest-paid executives in the tech industry, currently owns an aggregate of 161,029 shares after the Thursday sale.
The shares of Apple Inc. (NASDAQ:AAPL) are trading slightly below their 52-week high of $130.49, after reclaiming the level reached in the summer of 2015. Although Apple’s shares have gained 37% in the past year, some question the sustainability of the $130-per-share level because the tech giant’s largest overseas market – China – has become saturated. The iPhone maker reported net sales of $78.35 billion for the quarter that ended December, up $2.5 billion year-over-year. The company’s top-line figure was positively impacted by an additional week in the first quarter of 2017, primarily offset by an earlier launch of iPhone 7 and 7 Plus, as well as the effect of weakness in foreign currencies against the U.S. dollar. Ken Fisher’s Fisher Asset Management upped its position in Apple Inc. (NASDAQ:AAPL) by 2% during the fourth quarter to 11.50 million shares.
Cluster of Insider Selling at the World’s Largest Asset Manager
Last but certainly not least, a number of high-ranked executives at BlackRock Inc. (NYSE:BLK) offloaded shares last week. Jeff Smith, global head of Human Resources and a member of the Global Executive Committee, discarded 5,250 shares on Friday at a price of $377 per share, cutting his ownership to 16,686 shares. Rob Fairbairn, Senior Managing Director, sold 2,060 shares on Thursday at prices between $371.07 and $371.30 per share and 2,915 shares on Friday at $374.49 apiece. Mr. Fairbairn currently owns a total of 49,868 shares. Chief Operating Officer Robert L. Goldstein liquidated 10,374 shares on Friday at an average price of $377.31 per share, a sale that trimmed his stake to 49,348 shares. These sales were some of the largest transactions completed by BlackRock executives last week.
The world’s largest asset manager purchased FutureAdvisor, a so-called robo-adviser, during the summer of 2015, a move that could strengthen BlackRock Inc. (NYSE:BLK)’s position in the ETF market should robo-advisors become mainstream. Robo-advisors usually use low-cost exchange traded funds or index funds to construct portfolios. Just recently, BlackRock’s exchange-traded fund unit, called iShares, reached $1 trillion in assets in the United States for the first time. The shares of the world’s largest ETF provider are up 22% in the past 12 months. John Zaro’s Bourgeon Capital owns 7,960 shares of BlackRock Inc. (NYSE:BLK) as of the end of December.