The end of the current trading year is slowly approaching, along with the much-awaited holidays. Most U.S.-listed companies have already released their third-quarter earnings reports, so corporate windows for insiders to buy and sell stock have been opening rapidly lately. The volume of insider trading activity has climbed quite significantly over the past few weeks, while insider selling is currently more prominent and energetic than it has been over the past several months ago. The Insider Monkey team pinned down three companies that have seen the largest insider sales so far this week (spur-of-the-moment sales that were not conducted under trading plans and related to freshly-exercised stock options), so this article will examine the performance of those companies over the past few weeks and months so as to figure out what might have caused insiders to unload holdings so heavily.
Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does besides providing high-quality articles. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
Let’s start off by investigating the insider trading activity at Builders FirstSource Inc. (NASDAQ:BLDR), which has had two of its Directors heavily discarding their holdings this week. Director Cleveland A. Christophe offloaded 150,000 shares on Tuesday at a weighted average price of $14.26, cutting his holdings to 61,064 shares. Meanwhile, Robert C. Griffin sold 97,025 shares on the same day at prices in the range of $14.01-to-$14.62 per share, remaining with 59,133 shares. The shares of the supplier of residential building products are up 102% year-to-date, so it’s not surprising to see insiders cashing out their holdings at this point in time. The homebuilding industry has strengthened noticeably since 2011, but the level of housing starts still remains below the historical average. In spite of the significant improvement of this industry, the limited access to credit for small homebuilders and homebuyers has hindered a potentially stronger housing recovery. Builders FirstSource Inc. (NASDAQ:BLDR) received more attention from the hedge funds tracked by Insider Monkey during the June quarter, as the number of investment firms with positions in the stock increased to 25 from 15 quarter-over-quarter. Royce & Associates, founded by Chuck Royce, reduced its position in Builders FirstSource Inc. (NASDAQ:BLDR) by 239,648 shares during the third quarter, remaining with 537,605 shares.
Cooper Tire & Rubber Co (NYSE:CTB) saw its top executive discard a portion of his stake this week. Chairman, Chief Executive Officer and President Roy V. Armes disposed of 100,000 shares on Wednesday at a weighted average price of $41.94. Roy Armes currently holds a direct ownership stake of 298,132 shares, which includes 173,650 restricted stock units. The tire design, manufacturing and marketing company has seen its shares gain 18% since the start of 2015, but several valuation metrics indicate that the stock is still undervalued relative to the broader market. For instance, the company’s trailing P/E ratio of 10.14 is significantly below the median of 23.41 for the companies included in the S&P 500 Index. It is also worth pointing out that the tire manufacturer pays out a quarterly dividend of $0.105 per share, which provides a current dividend yield of 1.01%. The number of hedge funds monitored by our team with positions in the company climbed to 26 from 22 during the second quarter. Cliff Asness’ AQR Capital Management owned roughly 350,000 shares in Cooper Tire & Rubber Co (NYSE:CTB) at the end of the second quarter.
Finally, Gentex Corporation (NASDAQ:GNTX) saw one of its top executives sell a sizable share-block on Tuesday. Chairman and Chief Executive Officer Fred Bauer offloaded 762,000 shares at a sale price of $16.43 per share. After this sizable sell-off, the CEO currently holds a stake of roughly 6.62 million shares. The stock has lost nearly 10% since the beginning of the year, but it is trading at an attractive trailing P/E ratio of 16.13. Just recently, the company that designs and manufactures automatic-dimming rearview mirrors and electronics for the automotive industry, commercial smoke alarms for the fire protection industry, among other things, released its strong third-quarter financial results. Gentex’s revenues increased 11.1% year-on-year to $389.8 million, while its net income climbed 8% year-over-year to $78.3 million or $0.28 per diluted share. The exchange rate fluctuations, the sluggish global economic growth and other less weighty risks might represent some transitory headwinds for the company in the upcoming quarters. The number of hedge funds invested in the company at the end of the June quarter stood at 26, compared with 17 registered in the previous quarter. Israel Englander’s Millennium Management held a 895,056-share position in Gentex Corporation (NASDAQ:GNTX) on June 30.