Heavy insider buying is usually viewed as a bullish signal within the investment community, mainly because there seems to be only one reason corporate insiders are buying shares in their own companies. Unlike most indicators based on historical data, insider buying mostly serves as a forward-looking indicator. Security purchases on the part of insiders show their belief that their company’s stock is worth much more than current available price levels.
Past research, analysts with acumen in insider trading, as well as experts on insider trading suggest that clusters of insider buying are a lot more worthwhile and informative than single buys. As Dr. Inan Dogan, the founder of Insider Monkey and a seasoned researcher in the field of insider trading, said in an interview conducted a little while ago: “One insider might overestimate a company’s prospects, but there is higher uncertainty when many insiders are buying.” That being said, the following article will reveal a massive cluster of insider buying observed at one company, as well as discuss other noteworthy insider transactions reported with the SEC on Thursday.
At Insider Monkey, we track around 750 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).
CEO of Struggling Industrial-Product Maker Buys Shares After Earnings Release
To start with, the man in charge of Actuant Corporation (NYSE:ATU) filed Thursday to disclose the purchase of a relatively ample block of shares. President and Chief Executive Officer Randal W. Baker bought 10,000 Class A shares on Tuesday at prices varying from $22.53 to $22.55 per share. Following the recent purchase, Mr. Baker currently owns an aggregate of 79,376 shares.
The insider buying comes shortly after the industrial-product maker posted top- and bottom-line declines for its fourth quarter that ended August 31, reflecting a “tepid demand environment” according to the CEO. Actuant Corporation (NYSE:ATU)’s fourth-quarter sales fell by 8% year-over-year to $276 million despite a 4% net benefit from acquisitions and divestitures. More importantly, the company’s core sales, sales excluding the impact of acquisitions, divestitures and foreign currency rate changes, dropped 11% year-over-year. The shares of the industrial-product maker are 9% in the red thus far in 2016. Mason Hawkins’ Southeastern Asset Management was the owner of 6.41 million shares of Actuant Corporation (NYSE:ATU) at the end of the second quarter.
Several sets of noteworthy insider buying and selling will be discussed in more detail on the next two pages of this article.