Although investors and other stock market participants tend to avoid keeping track of insider selling activity, Insider Monkey closely monitors both insider buying and selling. The primary reason we keep a close eye on the latter is because past research suggests that companies witnessing heavy insider selling tend to underperform companies with insider buying. This means that shorting companies with insider selling and simultaneously going long companies with insider buying could generate good trading profits even amid bear markets. Leaving this discussion aside, it should be noted that the Insider Monkey team avoids analyzing insider trades conducted under various trading plans, known as Rule 10b5-1 trading plans. Instead, we focus on the spur-of-the-moment trades, mainly because recent research shows that spontaneous or opportunistic trades by insiders tend to generate higher returns. With that in mind, let’s proceed to an analysis of such insider trading behavior (namely insider selling) witnessed at three companies recently.
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Let’s get down to the first company that witnessed heavy insider selling in recent weeks, which is Allegiant Travel Company (NASDAQ:ALGT). Chief Executive Officer and President Maurice J. Gallagher, Jr., offloaded 292,200 shares on Wednesday at a price of $163.50 per share. A total of 39,200 shares from that freshly-sold block was held by an LLC which is controlled by the CEO, while 3,000 units were held through a trust fund. After the recent sales, the CEO currently holds a direct ownership stake of 3.16 million shares, along with an additional 200,000 shares held indirectly through the LLC and 15,000 shares held via the trust fund. According to a public statement made by the company, Mr. Gallagher intends to use the proceeds from the aforementioned sales mainly to pay down outstanding debt for existing personal ventures.
Allegiant Travel Company (NASDAQ:ALGT) is a leisure travel company that focuses on providing travel services to residents of under-served cities in the United States. The budget airline company has seen its shares skyrocket by 298% over the past five years despite experiencing a terrible second half of 2015 in terms of stock performance. Allegiant Travel Company has been growing at a solid pace over the past several years, as evidenced by both its stock performance and revenue growth trajectory. The company generated total operating revenue of $1.26 billion during 2015, an increase from $1.14 billion in 2014, $996.15 million in 2013, and $908.72 million in 2012. Moreover, the ultra-low cost airline offered 296 routes at the end of December 2015, up from 233 offered at the end of the prior year. The company’s management reckons that building and maintaining a low cost structure is of crucial importance in the airline industry, a strategy that has assisted the company in driving growth in recent years. Allegiant’s operating expense per available seat mile (CASM) dropped to $0.0845 in 2015, from $0.1047 in 2014, mainly due to favorable fuel prices and cost controls. Excluding the cost of fuel, operating CASM declined to $0.0581 in 2015 from $0.0613 in 2014. What’s more, the company also has a relatively strong balance sheet, considering its $397.4 million in unrestricted cash, cash equivalents and investment securities as of December 31, and its total debt of only $641.7 million. Shares of Allegiant are currently trading at 11.90-times expected earnings, slightly above the median forward P/E ratio of 9.50 for the airline industry. Jim Simons’ Renaissance Technologies owns a stake of 1.26 million shares in Allegiant Travel Company (NASDAQ:ALGT) as of December 31.