Aside from tracking the activity of over 700 hedge funds, at Insider Monkey we also follow the transactions of company insiders, which are usually employees, board directors or shareholders with stakes larger than 10%. Often insiders acquire shares as a part of their compensation or exercise some warrants or other options that allow them to buy shares at below-market prices, which are then sold for profit. However, in some cases, insiders acquire large amounts of shares in the open market and these transactions capture our attention. In the last couple of days three companies have seen significant bullish insider activity: Opko Health Inc. (NYSE:OPK), Pacific DataVision, Inc. (NASDAQ:PDVW), and LGI Homes Inc (NASDAQ:LGIH). Let’s take a look at each one of them in more detail.
In Opko Health Inc. (NYSE:OPK), the CEO and Chairman, Dr. Phillip Frost, disclosed the acquisition of 14,400 shares via Frost Gamma Investments Trust, of which Dr. Frost is a trustee. Following the acquisition of shares in multiple transactions on March 20, Frost Gamma holds some 154.48 million shares. In addition, the insider holds 2.01 million shares directly and another 20.09 million shares indirectly through The Frost Group, LLC, of which Frost Gamma Investment Trust is a principal member. Opko Health Inc. (NYSE:OPK) is a $6.60 billion biopharmaceutical and diagnostics company, whose stock has surged by 60% over the last 52 weeks. Recently, the company announced that SciVac Ltd., an Israel-based company in which Opko Health Inc. (NYSE:OPK) holds a 45% stake, entered into an agreement to be acquired by Levon Resources Ltd. Following the deal, Opko Health will hold around 30% of the new company’s stock. Billionaire George Soros‘ Soros Fund Management is another shareholder of Opko Health, owning 235,600 shares as of the end of 2014.
Pacific DataVision, Inc. (NASDAQ:PDVW) also appeared on our radars as Stephen Feinberg of Cerberus Capital Management reported the acquisition of 242,136 shares at an average price of $44.16 per unit. Following the transactions, Cerberus holds around 2.30 million shares of Pacific DataVision, which represent 18.39% of the company’s outstanding common stock. Pacific DataVision, Inc. (NASDAQ:PDVW) is engaged in mobile workforce management solutions, and the development and sale of wireless communications applications.
Cerberus acquired the shares a couple of days after the company reported changing its name to pdvWireless and unveiled the name of its two-way radio solution – DispatchPlus. Moreover, Pacific DataVision, Inc. (NASDAQ:PDVW) recently raised $225 million worth of capital, bought a nationwide block of 900 MHz spectrum from Sprint Corp (NYSE:S), and entered into a technology relationship with Motorola Solutions Inc (NYSE:MSI). Pacific DataVision was not included in the official list of Section 13(f) Securities for the last quarter, therefore institutional investors have not disclosed any positions in the company in the last round of 13F filings.
LGI Homes Inc (NASDAQ:LGIH), a $308 million residential building company saw several insiders acquire shares in the last couple of days. The largest amount was purchased by Duncan Gage, a director of the company, who disclosed the acquisition of nearly 27,000 shares on March 18 and 19. Following the transactions, Mr. Gage holds directly 33,785 shares and around 17,000 shares via his and his spouse’s retirement plans. Aside from Mr. Gage, two other directors of LGI Homes Inc (NASDAQ:LGIH), Christopher Sansbury and Ryan Edone, acquired 3,000 shares and 4,095 shares respectively on March 18. Following the purchase of those additional shares, Mr. Sansbury holds some 178,600 shares directly and 23,700 shares indirectly, while Mr. Edone owns 15,000 shares directly and 7,500 shares indirectly. Among the funds that we track, Geoffrey Raynor’s Q Investments (Specter Holdings) is the largest shareholder of LGI Homes Inc (NASDAQ:LGIH), owning 717,200 shares as of the end of 2014, up by 106% on the quarter. All insiders bought shares after the company reported its financial results for 2014, with revenue growing to $383 million from $163 million a year earlier and earnings per share advancing to $1.37 from $1.08.
In some cases, following the activity of insiders can provide smaller investors with an edge that could allow them to beat the market. Moreover, a good strategy is to combine insider activity with the sentiment of hedge funds regarding a particular company, especially if it is a small-cap stock. Our strategy based on the 15 most popular small-cap stocks among over 700 hedge funds returned roughly 132% between mid-2012 and March 2015. In comparison the S&P 500 ETF (SPY) gained only around 53% during that period. Moreover, our back tests also showed that a portfolio that immitates 15 most popular small-cap stocks among hedge funds outperformed the market by an average of 1.0 percentage point per month between 1999 and 2012.