Notable Insider Sales Registered at Capella Education Company (CPLA) and Two Other Companies

Examining insider trading behavior should serve as a primary tool of fundamental security analysis, as investors need to know how insiders feel about their companies’ shares. Corporate insiders usually buy shares on the open market for one simple reason: the stock is cheap. On the other hand, insider selling appears to be much more cumbersome to interpret, considering that insiders can sell shares for a wide variety of reasons such as portfolio diversification, tax expenses, and estate planning, among other things. While not foolproof, past research proves that corporate insiders are pretty good at trading their companies’ securities, so it does pay off to keep track of insider trading activity. Moreover, research shows that companies witnessing insider selling tend to underperform companies with insider buying. Most insider trading experts recommend investors looking for clusters of insider selling, which may raise red flags on some occasions. Insider Monkey processed numerous Form 4 filings submitted with the SEC so far this week and identified three companies with notable insider selling.

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Capella Education Company (NASDAQ:CPLA) had one member of its Board offload shares in the past several trading sessions. Director Stephen G. Shank, Founder, Former Chairman and Retired Chief Executive Officer of the publicly-traded for-profit education company, sold out the entire stake of 16,850 shares held by the Shank Family 2013 Generation Skipping Trust on Friday and Monday at prices that ranged from $51.49 to $52.62 per share. Mr. Shank also reported the sale of 19,730 shares that occurred on Monday and 13,539 shares on Tuesday, all of which were held by the Judith F. Shank Revocable Trust that continues to own 43,101 shares. These two sizable blocks of shares were sold at prices varying from $51.04 to $52.48 per share. Mr. Shank also owns 77,392 shares through the Stephen G. Shank Revocable Trust and 73,900 shares through the Stephen G. Shank Sept. 2013 7-Yr Grantor Retained Annuity Trust.

Capella Education Company (NASDAQ:CPLA) is an online postsecondary education services company whose subsidiaries include: Capella University, which offers doctoral, master’s and bachelor’s programs mainly for working adults; Arden University, an independent provider of United Kingdom university distance learning qualifications; Sophia Learning LLC, a learning platform that supports self-paced learning; and Capella Learnings Solutions, which provides online non-degree, high-demand, job-ready skills, training solutions and services. The Minneapolis-based education company has seen its shares advance 10% since the beginning of 2016, which might serve as one reason behind Mr. Shank’s recent sales. Capella Education Company generated total revenues of $430.27 million in 2015, which represents an increase from $421.97 million in 2014 and $415.62 million in 2013. The increase in the company’s 2015 top-line figure was mainly driven by higher quarterly average total Capella University enrollments, average tuition price increases, and an increase in average courses per learner.

Earlier this year, the company announced intentions to divest Arden University and re-channel soon-to-be obtained resources from the divestiture to FlexPath and the non-degree market in the U.S., which are believed to generate a higher return for shareholders. Capella Education’s shares currently change hands at 13.8-times expected earnings, below the forward P/E ratio of 17.5 for the S&P 500 Index. A total of 15 hedge funds from our database had stakes in the education company at the end of 2015, accumulating 24% of its outstanding common stock. Jim Simons’ Renaissance Technologies reported ownership of 945,100 shares in Capella Education Company (NASDAQ:CPLA) through its 13F filing for the December quarter.

The next two pages of this article examine the insider selling registered at Willis Lease Finance Corporation (NASDAQ:WLFC) and Agilent Technologies Inc. (NYSE:A).

Willis Lease Finance Corporation (NASDAQ:WLFC) saw the man-in-charge of its business unload a sizable block of shares last week. Charles F. Willis IV, Founder and Chief Executive Officer of the lessor of commercial aircraft engines, sold 60,000 units of common stock on Friday for $21.59 each, trimming his direct ownership stake to 704,681 shares. Those shares were sold back to the company and cancelled under its existing repurchase program. Mr. Willis also holds an indirect ownership stake of 2.13 million shares through CFW Partners. Moreover, former Senior Vice President and Chief Financial Officer, Bradley S. Forsyth, sold 738 shares last Wednesday and 389 shares on Friday at a weighted average price of $21.77, which reduced his ownership to 17,344 shares.

Willis Lease Finance Corporation’s business involves acquiring and leasing commercial aircraft engines and related aircraft equipment. The company’s lease portfolio included 201 engines and related equipment, 10 aircraft, as well as five spare parts packages at the end of 2015. The company also managed a lease portfolio of 40 engines and related equipment for other parties. Lease rent revenue, which accounted for 54% of the company’s total revenue in 2015, increased to $107.87 million in 2015 from $101.75 million in 2014. The increase was mainly driven by a higher average size of the company’s lease portfolio and higher average portfolio utilization. Meanwhile, maintenance reserve revenue, which constituted 27.6% of total revenue last year, increased to $55.06 million in 2015 from $53.36 million in 2014, which reflected the higher usage of engines under lease.

Willis Lease Finance’s market capitalization increased by 14% in the past 52 weeks, so Mr. Willis might have decided to diversify his holdings in the light the exceptional stock performance in the past year. A mere two money managers monitored by Insider Monkey were invested in the engine lessor at the end of December, who stockpiled 11.40% of the company’s total number of outstanding shares. Peter Schliemann’s Rutabaga Capital Management owned nearly 644,000 shares of Willis Lease Finance Corporation (NASDAQ:WLFC) on December 31.

Agilent Technologies Inc. (NYSE:A) saw three different insiders offload shares in March, but most insider sales were associated with newly-vested stock options. So let’s only examine the insider selling unrelated to freshly-exercised stock options and pre-arranged trading plans. Director Heidi Fields discarded 30,000 shares on Thursday at prices varying from $39.71 to $40.05 per share, which trimmed his ownership to 57,312 units of common stock.

Agilent Technologies is a life sciences, diagnostics and applied chemicals company that provides application-focused solutions such as instruments, software, services and consumables for laboratory workflow. The company’s primary product categories include liquid chromatography systems and components, liquid chromatography mass spectrometry systems, gas chromatography systems and components, to name just a few. At the beginning of March, the company announced an investment of $80 million in privately-held Lasargen, an emerging biotechnology company that has innovative next-generation sequencing technology. As a result, Agilent Technologies is set to own a 48% ownership stake in the Houston-based company, as well as join Lasargen’s Board of Directors. Moreover, Agilent also has the option to purchase the remaining shares of Lasargen for an additional $105 million until March 2018. Next-generation sequencing is a DNA sequencing technology that has revolutionized genomic research in recent years, which enables researchers to sequence an entire human genome within a short period of time.

Shares of Agilent are down 5% in the past 12 months and are 4% in the red thus far in 2016. The stock is priced around 18.4-times expected earnings, slightly above the forward P/E ratio for the S&P 500 benchmark. A number of 46 hedge funds from our system had long positions in the company at the end of 2015, accumulating almost 11% of its shares. Ken Griffin’s Citadel Advisors LLC upped its position in Agilent Technologies Inc. (NYSE:A) by 65% during the December quarter, ending 2015 with 3.47 million shares.

Disclosure: None