Nike Inc. (NKE) and Two Other Companies Witness Mild Insider Buying, Plus Notable Insider Selling at Other Companies

A common fallacy among inexperienced investors is that all insider trading is illegal. However, one should keep in mind that corporate insiders can buy and sell shares of their companies legally as long as they play by the rules imposed by the U.S. Securities and Exchange Commission and do not trade on material non-public information. Numerous research studies focused on estimating the returns earned by insiders when they trade their company’s stock conclude that insider purchases earn abnormal returns of more than 6% per year.

A few people would disagree that information is very valuable commodity. Corporate insiders usually have a great deal of information, a lot more up-to-date and useful information than the second-hand information possessed by outsiders such as journalists, hedge fund managers and Wall Street analysts. But it is not just the knowledge that makes corporate insiders so successful at trading their company’s shares. Their contrarian approach to investing combined with the superior knowledge about their companies enable corporate insiders to earn good trading profits when trading their company’s shares. With that in mind, let’s have a look at a set of noteworthy insider transactions reported with the SEC on Monday.

At Insider Monkey, we track around 740 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).

Board Member of Struggling Athletic Footwear and Apparel Company Buys Some Shares

One member of Nike Inc. (NYSE:NKE)’s boardroom bought a small chunk of shares last week. Director John C. Lechleiter snapped up 1,000 shares on Friday at an average cost of $52.72 per share. Following the recent purchase, Dr. Lechleiter currently holds an ownership stake of 27,660 shares.

The insider purchase comes a few days after the largest seller of athletic footwear and apparel in the world released its financial results for the first quarter of fiscal 2017 that ended August 31. While Nike Inc. (NYSE:NKE)’s top- and bottom-line figures beat Wall Street’s forecasts, the company failed to meet expectations on future wholesale orders and gross margins. Worldwide future orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from September 2016 through January 2017, were $12.3 billion, up 5% relative to the same period of the previous year. This compares with the 9%-gain recorded in the same period last year and the 8%-gain expected by Wall Street analysts. Lower-than-anticipated orders from wholesale partners and fresh data showing competitors gaining market share in some key categories are fueling concerns around Nike’s dominance. Nike shares are 15% in the red thus far in 2016. Stephen Mandel’s Lone Pine Capital was the owner of 18.31 million shares of Nike Inc. (NYSE:NKE) at the end of the June quarter.

The next pages of this article will discuss other insider transactions reported with the SEC on Monday.

CFO of Leading Brazilian Steakhouse Acquires New Stake

An executive at Fogo De Chao Inc. (NASDAQ:FOGO) recently has purchased shares of his company for the first time. Anthony D. Laday, who has been the company’s Chief Financial Officer since April 2014, acquired a new stake of 1,000 shares on Friday at $10.62 apiece. While the size of the purchase is not very significant, the timing of the purchase appears to be quite telling. After all, Mr. Laday could have initiated a stake in the company over the course of the last two years or so, but the initial purchase was made after a little more than two years since he embarked on his role as CFO.

Fogo de Chão is a leading Brazilian steakhouse that specializes in fire-roasting meats utilizing the centuries-old Southern Brazilian cooking technique of churrasco. Fogo De Chao Inc. (NASDAQ:FOGO) operates 43 restaurants, 32 of which are located in the United States, 10 in Brazil and one in Mexico. The company’s total revenue for the three months ended July 3 was $69.55 million, up by $1.3 million year-on-year. The increase in Fogo De Chao’s top line was mainly driven by a $5.2 million-increase in non-comparable restaurant sales, and was offset by foreign currency headwinds and a 1.6% decrease in comparable restaurant sales. Fogo De Chao has seen its market cap fall by 30% in the past year, which likely explains the CFO’s decision to acquire shares. David Keidan’s Buckingham Capital Management added a 78,232-share stake in Fogo De Chao Inc. (NASDAQ:FOGO) to its portfolio during the second quarter.

Executive at Small-Cap REIT Purchases Shares

One member of Wheeler Real Estate Investment Trust Inc. (NASDAQ:WHLR)’s executive team also snapped up some shares this past week. David Kelly, Senior Vice President, Director of Acquisitions for Wheeler, bought 17,285 shares on Friday at a price of $1.74 each. After the recent purchase, Mr. Kelly currently owns 38,253 shares.

The shares of the commercial real estate investment company focused on acquiring and managing income-producing retail properties with a focus on grocery-anchored centers are down a little less than 1% since the start of the year. Wheeler Real Estate Investment Trust Inc. (NASDAQ:WHLR) owned and operated 55 centers, one office building and ten underdeveloped properties at the end of June. In September, the REIT’s Board of Directors authorized a quarterly cash dividend of $0.0175 per share, which equates to a current annual dividend yield of around 12%. There were seven hedge funds from our system invested in Wheeler at the end of the second quarter, which hoarded up approximately 23% of the company’s total number of outstanding shares. Jim Simons’ Renaissance Technologies LLC reported ownership of 273,600 shares of Wheeler Real Estate Investment Trust Inc. (NASDAQ:WHLR) in its 13F filing for the April-to-June period.

The final page of this article will discuss fresh insider selling at two other companies.

Insiders at Liquidating REIT Sell Shares

Two insiders at New York REIT Inc. (NYSE:NYRT) discarded shares last week. To start with, Board member William M. Kahane sold 42,951 shares on Thursday and 71,981 shares on Friday at prices ranging from $9.15 to $9.23 per share, trimming his ownership stake to 375,952 shares. Patrick A. O’Malley, Chief Investment Officer since June 2015, liquidated 8,311 shares on Thursday at prices that fell between $9.25 and $9.26 per share. Following the recent sale, Mr. O’Malley currently holds a stake of 36,198 shares.

In early August, the real estate investment trust that owns a portfolio consisting of office and retail properties announced the beginning of a liquidation process following strong criticism of the management by shareholder WW Investors LLC. New York REIT Inc. (NYSE:NYRT) owned 19 properties located in New York City on June 30. The so-called liquidation process aims at unlocking shareholder value; an attempt to close down the discrepancy between the REIT’s net asset value and market value. The officer and retail-property owner plans to sell its assets and return the proceeds to shareholders, pay down its debt load and delist from the New York Stock Exchange. Clint Carlson’s Carlson Capital owned 1.32 million shares of New York REIT Inc. (NYSE:NYRT) at the end of June.

Several Executives at Matrix Service Sell Shares

Two members of Matrix Service Co (NASDAQ:MTRX)’s executive team liquidated shares this past week. Justin D. Sheets, Vice President of Legal and Risk Management since October of 2014, unloaded 2,100 shares on Friday at prices ranging from $18.71 to $18.73 per share, cutting his holding to 13,779 shares. More importantly, President and Chief Executive Officer John R. Hewitt sold 14,043 shares on the same day at a weighted average price of $18.75 per share. Mr. Hewitt currently owns 230,947 shares.

Matrix Service Co (NASDAQ:MTRX), which offers engineering, fabrication, construction, and repair and maintenance services to several markets including the oil and gas industries, has seen the value of its stock drop by 7% since the beginning of the year. At the end of August, the company released its financial results for the fourth quarter and year that ended June 30, which revealed fiscal 2016 revenue of $1.31 billion versus $1.34 billion recorded for the previous fiscal year. However, the backlog at the end of June totaled $868.7 million, down massively from $1.42 billion recorded at the end of June of 2015. The record backlog of $1.42 billion reflected two major multi-year project awards received in the second half of fiscal 2015. Small-cap specialist Royce & Associates, founded by Chuck Royce, had 2.47 million shares of Matrix Service Co (NASDAQ:MTRX) among its holdings at the end of the second quarter.

Disclosure: None