All major U.S indexes closed in the green on Friday, marking their fifth consecutive week of gains. The Standard and Poor’s 500 rebounded into positive territory for 2016 on Friday, while the Dow Jones Industrial Average, which has enjoyed a six-session rally, gained 2.3% for the week. The sustained recovery in crude oil prices and positive U.S economic data have alienated mounting worries in equity markets about the state of the U.S economy and market conditions. Considering the recent rally in U.S equities, most investors and analysts would expect weakening insider buying and surging insider selling, but just the opposite happened last week. Fresh data reveals that last week’s dollar volume of insider buying more than doubled relative to the previous week, whereas the volume of selling decreased significantly week-over-week. So what can one make of this phenomenon? It is highly likely that corporate insiders have started to believe in the underlying strength of the U.S economy and are attempting to capitalize on the broader market sell-off that occurred earlier this year. The Insider Monkey team processed the majority of Form 4 filings submitted with the SEC on Friday and identified three companies with noteworthy insider buying, so let’s take a look at the recent insider behavior of the three companies in question.
Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).
Let’s begin our discussion with Minerva Neurosciences Inc. (NASDAQ:NERV), which had one member of its Board of Directors purchase a sizable block of shares. Director David J. Kupfer reported purchasing a new stake of 181,488 shares on Thursday at a price of $5.51 per share. Mr. Kupfer was appointed to the company’s Board of Directors in November 2015, so the timing of his purchase may be quite informative for investors (or the Director might have been restricted from buying shares due to a blackout period before the release of the company’s fourth-quarter earnings report).
Minerva Neurosciences Inc. (NASDAQ:NERV) is a clinical-stage biopharmaceutical company that focuses on the development of products for the treatment of patients suffering from central nervous system (CNS) diseases. The company’s portfolio of product candidates includes MIN-101 for the treatment of schizophrenia; MIN-202, co-developed with Janssen Pharmaceutica NV for the treatment of insomnia disorder and adjunctive major depressive disorder, simply known as MDD; MIN-117 for the treatment of MDD; and MIN-301 for the treatment of Parkinson’s disease. Earlier this month, Minerva pleased investors and stock market participants with positive top line results from a Phase Ib clinical trial of MIN-202, the aforementioned selective orexin-2 receptor antagonist designed to treat patients suffering from the major depressive disorder. These results allowed the company to move MIN-202 further in the process of drug development, which will involve a Phase IIb trail in patients suffering from this disease. Nonetheless, investors should be aware that none of Minerva’s product candidates have received FDA approval just yet, so the company is not generating any revenue associated with the sale or licensing of its products. There were four hedge funds in our system with stakes in the biopharmaceutical company at the end of December 2015, compared to three registered at the end of the prior quarter. These four funds amassed 13.40% of the company’s outstanding common stock. James Dondero’s Highland Capital Management reported owning 1.32 million shares of Minerva Neurosciences Inc. (NASDAQ:NERV) in its quarterly 13F for the October-to-December period.