The investment community is well aware that there are two kinds of insider trading: legal and illegal. The media has been discussing loud cases of illegal insider trading on a consistent basis, but not all forms of insider trading are illegal. Legal insider trading occurs when corporate insiders play by the rules set out the U.S. Securities and Exchange Commission when buying or selling shares of their own companies. Conversely, illegal insider trading involves transactions executed by directors and executives who had access to material non-public information related to acquisition announcements, earnings releases and other significant news unknown to the general public. As most corporate insiders have superior knowledge about their companies’ business developments, current challenges and future prospects than any of us, their transactions tend to be highly scrutinized by the investment community. For that reason, the following article will discuss several notable legal insider transactions reported with the SEC on Tuesday.
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).
The CEO of This Industrial Conglomerate Bought a Massive Block of Shares Last Week
General Electric Company (NYSE:GE)’s Chairman and Chief Executive Officer, Jeffrey R. Immelt, acquired 67,600 shares on Friday at a price of $29.59 per share. After the recent purchase, Mr. Immelt currently holds a stake of 2.16 million shares.
Earlier this week, the global digital industrial company announced plans to make investments worth at least $1.4 billion in Saudi Arabia, as the Persian Gulf kingdom intends to reduce its dependence on crude oil. The U.S. industrial conglomerate plans to double its workforce in the kingdom to 4,000 positions by 2020. Just recently, the Saudi government announced several reforms aimed at diversifying its economy away from petroleum products and General Electric Company (NYSE:GE) appears to have the suitable tools to assist the country achieve its goals. GE shares are down 2% thus far in 2016. The number of hedge funds from our system with stakes in GE increased to 64 from 54 during the first quarter of 2016. Nelson Peltz’s Trian Partners was the owner of 74.25 million shares of General Electric Company (NYSE:GE) at the end of March.
The next two pages of this insider trading article will discuss several noteworthy insider transactions registered at four separate companies.