The investment community is well-aware that corporate insiders can sell shares in their own companies for a wide variety of reasons, so insider trading watchers should mostly focus on insider selling that involves three or more insiders selling shares in the past 30 days or so. Clusters of insider selling appears to be more indicative of a feeling that companies are approaching or exceeding their “fair” market value. Heavy insider selling can help to avoid investing in bad stocks, so investors should always ask themselves why they want to buy stocks or hold onto stocks that executives and directors are selling. Insider Monkey analyzed dozens of Form 4 filings submitted with the U.S. SEC on Monday and pinpointed three companies with noteworthy insider selling.
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).
The Man in Charge of This Software Maker Sold Shares Last Week
Manhattan Associates Inc. (NASDAQ:MANH) has seen three different executives unload shares in the past 30 days, so let’s take a glimpse at the most recent insider selling. President and Chief Executive Officer Eddie Capel sold 20,000 shares on Friday at prices that ranged from $66.00 to $66.92 per share, cutting his overall holding to 197,438 shares.
The CEO’s sale comes after the software maker surprised investors with a stronger-than-expected first-quarter earnings report, which pushed the share price higher by 25% in the past month. The stock is almost flat year-to-date, but has gained 20% in the past 12 months. Manhattan Associates Inc. (NASDAQ:MANH) develops, sells, services and maintains software solutions designed to manage supply chains, inventory and omni-channel operations for retailers, wholesalers, logistics providers and other organizations. Going back to the aforementioned earnings report, the company reported record non-GAAP adjusted diluted earnings per share of $0.42 for the first quarter on record total revenue of $149.86 million. This compares to EPS of $0.34 on revenue of $133.52 million reported for the same period of the prior year. More importantly, Manhattan Associates increased its full-year 2016 revenue guidance to the range of $615 million to $620 million, which implies an annual growth rate of 10.5%-to-11.5%, versus the previous guidance of $609 million to $615 million. During the first quarter, the supply-management software maker completed license wins with new customers such as Levi Strauss & Co. and Central Garden & Pet Co (NASDAQ:CENT), as well as expanded relationships with existing customers such as Ascena Retail Group Inc. (NASDAQ:ASNA) and Under Armour Inc. (NYSE:UA).
Shares of Manhattan Associates are currently changing hands at around 33.5-times expected earnings, below the forward PE multiple of 36.8 for the Application Software sector, but significantly above the ratio of 18.8 for the Nasdaq 100 Index. Jim Simons’ Renaissance Technologies had 2.36 million shares of Manhattan Associates Inc. (NASDAQ:MANH) in its equity portfolio at the end of 2015.