Notable Insider Selling at Masco Corp (MAS) and 2 Other Companies

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.

The next two pages of this insider trading article discuss the insider selling activity witnessed at Masco Corp (NYSE:MAS) and Burlington Stores Inc. (NYSE:BURL).

Masco Corp (NYSE:MAS) had a member of its Board of Directors unload a massive block of shares last week. Richard A. Manoogian, Chairman Emeritus and former Chief Executive Officer, discarded 150,000 shares on Thursday at prices varying from $28.90 to $29.14 per share, cutting his overall holding to 664,611 shares.

Masco is a widely-known designer, manufacturer, and distributor of branded home improvement and building products such as KRAFTMAID and MERILLAT cabinets; DELTA, PEERLESS and HANSGROHE faucets, and bath and shower fixtures, among other things. Shares of Masco are up by 26% over the past 12 months despite experiencing a sharp pullback during December and January. The company generated net sales of $7.14 billion in 2015, up from $7.01 billion in 2014, $6.76 billion in 2013 and $6.29 billion in 2012. Last year’s sales growth was mainly driven by increased repair and remodel activity and new home construction in the United States and Europe, as well as favorable product mix, higher net selling prices, and acquisitions. The appreciation of the green buck relative to the Euro adversely impacted Masco’s financial performance in 2015. The management of the company anticipates that the demand for Masco’s branded products will remain quite solid, mainly owing to the sustained increase in both repair and remodel demand, and continued improvement in new home construction. The shares of the maker of building and home improvement products are trading at 16.60-times expected earnings, notably below the forward P/E ratio of 19.00 for home improvement retailers as a whole. The number of funds in our system with stakes in Masco increased to 40 from 38 during the December quarter. Cliff Asness’ AQR Capital Management upped its stake in Masco Corp (NYSE:MAS) by 66% during the October-to-December period, to 7.77 million shares.

Burlington Stores Inc. (NYSE:BURL)’s insider trading activity on the selling side has been quite high lately; however, some sales were either connected with freshly-exercised stock options or conducted under trading plans. In terms of spur-of-the-moment insider sales, we’ll start with Fred Hand, Executive Vice President of Stores, who jettisoned 25,000 shares on Wednesday at prices ranging from $52.97 to $53.41 per share, cutting his stake to 55,109 shares. Marc Katz, Executive Vice President and Chief Financial Officer, sold 12,000 shares last Monday at prices that fell between $52.10 and $54.25 per share and currently owns 99,936 shares.

Shares of Burlington Stores are 28% in the green year-to-date, so the question of why insiders have been cashing out portions of their equity holdings becomes somewhat irrelevant. Burlington Stores is a highly-recognized off-price retailer of branded apparel, with more than 500 retail stores spread across the United States. The company’s net sales for fiscal year 2015 that ended January 30 grew by 5.9% year-over-year to $5.10 billion. The top-line growth was partially driven by comparable store sales growth of 2.1%. More importantly, the management of Burlington Stores anticipates its 2016 net sales to increase by 6.5%-to-7.5%, and its comparable store sales to grow by 2.5%-to-3.5%. Just recently, analysts at Citigroup downgraded the stock to ‘Neutral’ from ‘Buy’, but maintained their price target on the stock at $58, which follows the exceptional stock performance of Burlington Stores since the beginning of 2016. In spite of the recent surge in its share price, Burlington Stores appears to be quite cheap relative to its competitors. The stock is priced at 17.20-times expected earnings, below the forward P/E multiple of 19.10 for Ross Stores Inc. (NASDAQ:ROST) and the ratio of 19.50 for TJX Companies Inc. (NYSE:TJX). Ken Griffin’s Citadel Advisors LLC trimmed its position in Burlington Stores Inc. (NYSE:BURL) by 40% during the December quarter, to 1.46 million shares.

Disclosure: None