Last week’s dollar volume of insider buying slightly increased relative to the volume recorded for the previous five-day period, but still remained at a low level. Meanwhile, exactly one-fourth of the companies included in the S&P 500 Index releasing their second-quarter earnings reports, with 68% of them having reported earnings above expectations and 57% of them having reported sales above consensus estimates. Hence, the lower the number of companies releasing top and bottom line figures below estimates, the weaker the volume of insider buying will be in the upcoming weeks. Why? Because corporate insiders usually follow the pattern of “selling high and buying low”.
Going back to the ongoing second-quarter earnings season, the blended earnings decline for the second quarter currently stands at 3.7%, meaningfully lower than the 5.5% decline projected ahead of the earnings season. The blended earnings combine the actual results for the companies that have already reported their results and estimated results for those companies yet to report. The insider selling-to-buying ratio for the past week stood at 26.0-to-1, which implies corporate insiders sold $26 worth of shares for each $1 worth of shares bought. That said, the following article will discuss the several noteworthy insider sales recorded with the SEC on Friday.
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).
Trucking Company Registers Massive Insider Sale after Lowering Financial Expectations
J B Hunt Transport Services Inc. (NASDAQ:JBHT) recently registered one of its largest insider sales of 2016,, as James K. Thompson, Chairman of the company’s Board of Directors, offloaded 20,000 shares on Wednesday at a price tag of $81.18 each. Mr. Thompson also transferred 2,175 shares pursuant to a divorce and confidential property settlement reached in 2011. After these transactions, the Chairman continues to own 65,746 shares.
The well-known trucking company has seen its market capitalization gain 13% since the start of 2016 even though the company recently lowered its financial expectations for 2016 due to declining freight rates. In mid-July, J B Hunt Transport Services Inc. (NASDAQ:JBHT) said it anticipates 2016 full-year revenue to increase 7% year-over-year, down from the previous projection of as much as 12%. Full-year operating income is anticipated to increase by a mere 5%, down from previous expectations of an 8%-to-11% expansion. Ken Griffin’s Citadel Advisors LLC owned nearly 475,000 shares of J B Hunt Transport Services Inc. (NASDAQ:JBHT) at the end of March.
Strong Performing Industrial Giant Witnesses Increased Insider Selling
Illinois Tool Works Inc. (NYSE:ITW) saw four different executives discard shares this past week, three of whom sold only freshly-exercised stock options. Michael M. Larsen, Chief Financial Officer and Senior Vice President, sold out his entire stake of 14,000 shares on Thursday at prices ranging from $113.90 to $114.11 per share. Although, Mr. Larsen does not own any shares of common stock at the moment, he does hold dozens of thousands of employee stock options and performance restricted stock units.
The recent insider selling comes shortly after the global manufacturer of a diversified range of industrial products and equipment raised its guidance for full-year earnings per share for the second quarter in a row. Illinois Tool Works Inc. (NYSE:ITW)’s full-year GAAP EPS guidance was raised to the range of $5.50-to-$5.70 per share from the prior guidance of $5.40-to-$5.60 per share. The engineering-equipment manufacturer recorded total revenue of $3.43 billion for the second quarter, down by a mere 0.1%. Foreign exchanges headwinds hit the company’s top line by 1.3%. ITW shares are up 23% thus far in 2016. Jim Simons’ Renaissance Technologies added a 537,000-share position in Illinois Tool Works Inc. (NYSE:ITW) to its portfolio during the first quarter.
The next page of this article will discuss fresh noteworthy insider selling activity registered at three other companies, including two well-known banks.