Non-Dividend Paying REIT and Leading Small-Cap Closed-End Fund Witness Mild Insider Buying, Plus Other Insider Transactions

The history shows that corporate insiders’ purchases of company stock outperform stock market gauges by a significant margin. On that note, the investment community finds one primary reason corporate insiders purchase shares of their companies, which is that insiders believe the share price of their company’s stock does not reflect the “true” earnings power of the business. This thesis appears to be viable given that it is relatively hard to come up with alternative explanations as for why insiders spend their hard-earned money to purchase shares.

Retail investors and other stock market participants interested in insider trading behavior can always visit the website of the U.S. SEC to find fresh insider trading transactions. Nonetheless, it is quite cumbersome to scan through hundreds of Form 4 filings on a daily basis. With help from our insider trading database, Insider Monkey compiles sets of both insider buying and selling that deserve investors’ attention on a daily basis. Our team processed the Form 4 filings submitted with the SEC on Friday and pinpointed five companies with notable insider trading activity, which are discussed in more detail below.

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).

Board Member at Innovator in Simulation Software for Product Engineering Purchases Shares

Let’s kick off our discussion by analyzing the insider buying activity observed at Exa Corp (NASDAQ:EXA). Board member Wayne D. Mackie bought 5,261 shares on Thursday and 5,304 shares on Friday at prices ranging from $14.87 to $14.93 per shares. Following the recent transactions, Mr. Mackie currently owns 80,027 shares.

The innovator in simulation software for product engineering has seen the value of its shares gain 27% since the beginning of the year. Exa Corp (NASDAQ:EXA) derives most of its revenue from the sale of simulation software using an annual capacity-based licensing model. The company’s license revenue for the three months that ended July 31 was $14.81 million, up from $12.98 million recorded for the same period of the previous year. The year-over-year increase of 14.1% was predominantly driven by increased consumption of simulation capacity by existing customers, as well as the addition of 16 new license customers. Jim Simons’ Renaissance Technologies LLC owned 181,600 shares of Exa Corp (NASDAQ:EXA) at the end of the June quarter.

The next two pages of this article will discuss another set of insider transactions reported with the SEC on Friday.

President of Large Small-Cap Closed-End Fund Purchases Shares at Discount

One influential member of Royce Value Trust Inc. (NYSE:RVT)’s executive team piled up some shares this past week. President Christopher D. Clark snapped up a new stake of 2,000 shares at $12.66 apiece.

Royce Value Trust Inc. (NYSE:RVT) operates as a closed-end diversified management investment company that seeks to invest at least 65% of its assets in equity securities primarily of small-cap and micro-cap companies. Closed-end shares can deviate from their net asset value quite significantly one some occasions, because a closed-end fund’s share price is set by supply and demand forces. On August 31, the largest small-cap closed-end fund recorded net assets per share of $14.92, whereas the market share price of the fund stood at only $12.75. Hence, investors could have grabbed $14,920 of assets by paying a mere $12,750, a discount of around 14%. All in all, the recent purchase completed by Mr. Clark might be explained by the discount at which the small-cap closed-end fund’s shares can be purchased. Clough Capital Partners, founded by Charles Clough, was the owner of 42,376 shares of Royce Value Trust Inc. (NYSE:RVT) at the end of the second quarter.

Insider at Non-Dividend Paying REIT Purchases Shares

One corporate insider at BRT Realty Trust (NYSE:BRT) also snapped up some shares last week. Jeffrey G. Rubin, Independent Trustee of BRT Realty Trust since 2004, acquired 4,262 shares on Thursday at a price target of $7.80 each. After the recent acquisition, Mr. Rubin currently holds an ownership stake of 37,510 shares.

The real estate investment trust that owns and operates multi-family properties and other assets has seen its market capitalization jump by 26% this year. On June 30, BRT Realty Trust (NYSE:BRT) owned 31 multi-family properties that consisted of 8,973 units. In early September, the REIT acquired a multi-family property in the city of Southaven, Mississippi, for $38.2 million. At the same time, BRT Realty Trust sold a multi-family property for $30.4 million at a significant gain after owning the property for less than three years. BRT Realty Trust has not paid any cash dividends since 2010, as the REIT used its net operating loss carry-forward to offset its taxable income. Royce & Associates, founded by Chuck Royce, reported ownership of 448,275 shares of BRT Realty Trust (NYSE:BRT) in its 13F filing for the second quarter.

The final page of this article will discuss the insider selling activity observed at two other companies.

EVP of Global Adhesives Provider Discards Shares

One member of HB Fuller Co (NYSE:FUL)’s management team offloaded a sizeable block of shares last week. James R. Giertz, Executive Vice President of Strategy, liquidated 25,000 shares on Friday at prices varying from $46.00 to $46.37 per shares. After the recent sale, Mr. Giertz currently holds a direct ownership stake of 58,121 shares.

The shares of the global adhesives provider are 24% in the green thus far in 2016. In late September, analysts at Citi initiated coverage on HB Fuller Co (NYSE:FUL) with a ‘Buy’ rating and a price target of $53. Citi analysts expect the second-largest global adhesives company to achieve earnings growth through portfolio expansion, a profitability turnaround in Europe, as well as optionality from merger and acquisition activities. “We like FUL’s portfolio shift toward both higher growth and margins in engineering adhesives,” an effort supported by the acquisition of Chinese engineering adhesives company Tonsan in February of 2015. Alyeska Investment Group, founded by Annand Parekh, had 374,188 shares of HB Fuller Co (NYSE:FUL) in its portfolio at the end of June.

Notable Insider Selling at Low-Priced Supplier of Semiconductor Test and Burn-In Equipment

Two corporate insiders at Aehr Test Systems (NASDAQ:AEHR) sold some shares last week. To start with, President and Chief Executive Officer Gayn Erickson discarded 7,000 shares on Thursday and 3,000 shares on Friday at prices that fell between $2.70 and $2.87 per share. The CEO currently owns 342,694 shares. Rhea J. Posedel, the founder of Aehr Test Systems and Chairman of its Board of Directors since March 2013, sold 1,925 shares last Tuesday at prices ranging from $3.09 to $3.20 per share. The shares were held in a trust fund that currently owns 989,364 shares.

The supplier of semiconductor test and burn-in equipment has seen its market value gain 42% in 2016. Aehr Test Systems (NASDAQ:AEHR)’s net sales primarily consist of sales of systems, test fixtures, die carriers, upgrades and spare parts, as well as revenues from service contracts. The company’s net sales for the three months that ended August 31 were $5.3 million, down from $6.6 million recorded a year ago. Nonetheless, the company recorded an impressive $10.4 million in bookings for the first quarter of fiscal 2017. Ken Griffin’s Citadel Advisors LLC acquired a new stake of 12,012 shares in Aehr Test Systems (NASDAQ:AEHR) during the April-to-June quarter.

Disclosure: None