Most stock market participants are looking forward to the Santa Claus Rally, which usually occurs during the last five trading sessions of each year. The S&P 500 Index has not posted losses in the period between November 20 and the end of the year since 2002, but the index is on track to break this trend in 2015. Nonetheless, some companies’ insiders were bullish on their companies’ stock last week and boosted up their holdings in expectations of strong future gains. Insider buying is relatively straightforward to interpret and represents a clear signal of strong future prospects. At the end of the day, it is hard to believe that an insider would invest his or her hard-earned capital in equities without anticipating an attractive return. With this in mind, the following article discusses several noteworthy insider buys reported with the SEC during the holiday-shortened week ahead of Christmas.
Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. 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 the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned 102% over the ensuing 38 months, outperforming the S&P 500 Index by more than 53 percentage points (read more details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
Actuant Corporation (NYSE:ATU) saw three different executives buy shares last week. To start with, Executive Vice President Eugene Edward Skogg purchased 5,000 Class A shares on Tuesday at prices that ranged from $23.66 to $23.69 per share, lifting his overall holding to 50,415 shares. Executive Vice President and Chief Financial Officer Andrew Lampereur snapped up a 20,000-share block on the same day at a weighted average price of $23.12 and currently holds 337,058 shares. Last but not least, Chairman, President and Chief Executive Officer Robert Arzbaecher bought 130,000 Class A shares on Tuesday and 80,000 shares on Wednesday at prices ranging from $22.79 to $24.44 per share. After the recent sizable purchases, the CEO currently holds 394,294 shares. The shares of this diversified company that designs and manufactures a wide range of industrial products and systems are down 9% for the year. Actuant Corporation (NYSE:ATU) mainly operates in three segments: industrial, energy, and engineered solutions. All these operating segments reported sluggish revenue growth for fiscal 2015, with the company’s total net sales declining to $1.25 billion from $1.40 billion reported for fiscal 2014. The energy segment was mainly impacted by a reduced capital spending and deferred maintenance activity in the oil and gas industry, which was in turn affected by declining crude oil prices. Meanwhile, the performance of the engineered solutions segment was impacted by a lower demand in auto, off-highway equipment and agriculture markets. Mason Hawkins’ Southeastern Asset Management added a 5.28 million-share position in Actuant Corporation (NYSE:ATU) during the third quarter.