It is already common knowledge that inside selling does not serve as a perfect indicator of future stock performance, mainly due to the increased usage of stock-based compensation. This implies that both directors and executives are mostly selling shares for reasons unrelated to their companies’ current developments or future market conditions. Corporate insiders usually tend to cash out their freshly-vested stock options right away, so insider trading observers should generally ignore this type of activity. But there are some kinds of insider selling that investors should pay close attention to: clusters of insider selling, high dollar volume of insider sales, and insider selling at struggling companies. However, investors should not interpret insider selling as though insiders do not believe in their companies’ future potential anymore, but rather look at this type of activity as a sign of “fair” valuation. It is hard to estimate the true value of a company, and corporate insiders have their own perceptions on whether their company is fairly valued or not. The history shows that companies with heavy insider selling tend to underperform companies witnessing insider buying, which means that insiders do have a better sense of the true valuation of their companies. Having said that, the following article will examine the recent insider selling registered at three companies, as well as discuss the recent performance of those companies.
Through extensive research, we have determined that the due diligence that the investors in our database employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also shown that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).
To begin with, TJX Companies Inc. (NYSE:TJX) saw one of its top-tier executives unload shares last week. Executive Chairman Carol Meyrowitz discarded 64,800 shares last Friday at prices that ranged from $75.19 to $75.72 per shares and trimmed her stake to 454,521 shares. Carol Meyrowitz recently moved into the role of Executive Chairman, after successfully serving the helm of the company for nine years. President Ernie Herrman embarked on the CEO role at the end of January 2016. TJX Companies Inc. (NYSE:TJX) has been growing at a solid pace under the leadership of Ms. Meyrowitz despite facing toughening competition in the off-price segment. The shares of the off-price apparel and home fashions retailer have advanced almost 10% over the past 52 weeks. TJX Companies Inc. (NYSE:TJX) operates more than 3,500 stores worldwide through four primary segments: Marmaxx, which operates T.J. Maxx, Marshalls and tjmaxx.com in the U.S.; HomeGoods in the U.S.; TJX Canada, which operates Winners, HomeSense and Marshalls in Canada; and TJX Europe, which operates T.K. Maxx, Home Sense and tkmaxx.com in Europe. The company’s net sales for fiscal 2016 that ended January 30 totaled $30.95 billion, up from $29.08 billion reported for the prior year. Its consolidated comparable store sales grew 5% year-on-year, after having grown 2% in the previous year. Moreover, TJX’s diluted earnings per share were $3.33 for fiscal 2016, which marked an increase of 5% year-on-year. The highly-successful company also intends to increase its quarterly dividend to $0.26 per share, which denotes an increase of 24% from the previous dividend. TJX is a soon-to-be Dividend Aristocrat considering its strong growth in recent years, as the company is on track to increase its annual dividend payment for the 20th consecutive year. There were 36 hedge funds from our system with stakes in TJX at the end of December 2015, which amassed 3% of the company’s outstanding shares. Ken Griffin’s Citadel Advisors LLC lifted its stake in TJX Companies Inc. (NYSE:TJX) by 70% in the December quarter to 1.93 million shares.