Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Market Tumult Hasn’t Stopped These Insiders From Buying Shares

All major U.S. indexes closed in the red on Wednesday, “thanks” to a grim earnings forecast by Wal-Mart Stores Inc. (NYSE:WMT) that triggered a selloff in consumer-related stocks. The Dow Jones Industrial Average lost 157.14 points during yesterday’s trading session, but the market should have been expecting this outcome given analysts’ third quarter earnings estimates. It is also worth pointing out that the insider buying activity fell quite significantly during the previous trading week, and it does not seem to be higher this week either. This might point to the fact that the prospects of the companies listed on the U.S stock markets are not so bright on aggregate. However, there were a few companies that registered a high volume of insider buying activity recently which we’ll discuss in this article in an attempt to identify potentially lucrative trading opportunities.

Insider Trading 3

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 102% over the ensuing three years, outperforming the S&P 500 Index by 53 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.

The first company discussed in this article is Container Store Group Inc. (NYSE:TCS), a leading retailer of storage and organization products in the United States. Chief Financial Officer Jodi Taylor reported acquiring 5,000 shares this Tuesday at a weighted average price of $12.50. After the recent purchase, the executive currently owns 33,629 shares. The shares of Container Store Group are 40% in the red year-to-date, mainly owning to the weaker-than-expected financial results for the fiscal second quarter that ended August 29. The retailer posted consolidated net sales of $195.5 million, which were up by 1.2% year-over-year. However, Container Store Group Inc. (NYSE:TCS)’s net income per diluted share came to $0.06, compared to $0.11 reported a year ago. Hence, it is quite evident that the executive is acquiring shares with the belief that the market punished them too strongly following the release of the earnings report. It might also be the case that the CFO is simply trying to convince the market that the prospects at the company aren’t as bad as they seem to be. Royce & Associates, founded by Chuck Royce, owns 1.76 million shares of Container Store Group Inc. (NYSE:TCS) as of June 30.

Follow Container Store Group Inc. (NSE:TCS)
Trade (NSE:TCS) Now!

The following page details the notable insider buying activity at two more companies.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.