The main indices on the US stock market are gaining ground on Tuesday, recovering from yesterday’s declines as markets across the world are in the green. The National Association of Realtors is scheduled to release its report on existing home sales in July tomorrow. In other news, investors are also awaiting Fed chair Janet Yellen’s speech at Jackson Hole on Friday to see if the central bank plans to raise interest rates in September, after other Fed officials have sent positive signals in the last couple of days.
Meanwhile, over the past week, the number of transactions among corporate insiders involving the sale of shares considerably outpaced the number of buying transactions, although the majority of sales was executed under 10b5-1 plans. On our website, we have an extensive database that contains all insider transactions as they are reported with the Securities and Exchange Commission and, for this article, we have selected the five companies with the most interesting insider activity.
Following insider activity can be a profitable strategy, but investors should be aware of some of the challenges that come along with imitating insiders (see more details). Aside from following insiders, we also track over 750 hedge funds and other institutional investors, whose equity portfolios we analyze on a quarterly basis in order to identify stocks that are part of our small-cap strategy (read more about our strategy). This is why, we are also going to mention what the funds in our database think about the companies in question, aside from discussing the latest insider transactions.
Let’s start with ARMOUR Residential REIT, Inc. (NYSE:ARR), in which both co-CEOs acquired shares yesterday. Jeffrey J. Zimmer, who is also ARMOUR’s president, reported the purchase of 10,000 shares at a weighted average price of $22.11 per unit. Following the transaction, Zimmer owns 63,629 shares of the REIT directly. The second co-CEO, Scott J. Ulm, who is also the Chief Investment Officer of the trust, bought 5,000 shares at $22.07 apiece and increased his exposure to 65,229 shares owned directly. The same two insiders, Messrs. Zimmer and Ulm, acquired 15,000 shares and 10,000 shares of ARMOUR Residential REIT, Inc. (NYSE:ARR), respectively, back in May. Smart money investors (particularly those that we track) don’t seem to be very keen on investing in REIT’s as at the end of June, just four funds in our database held shares of ARMOUR Residential REIT, Inc. (NYSE:ARR), down from six funds a quarter earlier. Since the beginning of the year, ARMOUR Residential’s stock has inched up by 3% and currently sports a dividend yield of 11.74%.
Another company that registered insider buying is Penske Automotive Group, Inc. (NYSE:PAG). Roger S. Penske Jr., the Chairman and CEO of Penske Automotive, reported the acquisition of 300,000 shares in three transactions at a weighted average price of $42.55 per unit. The shares were bought by Penske Automotive Holdings Corp., which following the latest transactions owns approximately 31.37 million shares. Aside from these shares that Mr. Penske owns indirectly, he also indirectly holds 492,185 shares owned by Penske Corporation and has direct ownership of 993,337 shares. Penske Automotive Group is a provider of transportation services and has seen its stock gain a modest 3% year-to-date, even though the company has topped analysts’ EPS and revenue estimates for the last three reported quarters. Among the investors in our database, the number of funds bullish on Penske Automotive Group remained unchanged at 16 during the second quarter, with these funds holding 2.10% of the company’s outstanding stock at the end of June.
Head to the next page, where we are going to take a look at some more insider transactions registered lately.