Corporate insiders are a unique class of traders, as they have access to private information about their companies that investors, analysts and journalists do not have. It is important to note that most insiders have a large portion of their wealth in the form of equity stakes, thanks to the proliferation of equity-based compensation and stock grants. Hence, personal liquidity and diversification motives are affecting the timing of their insider sales, which makes it practically impossible to interpret accurately any given insider sale.
It appears that most investors tend to ignore insider selling metrics for the reasons mentioned above, so a naïve strategy of replicating all insider sales would not prove overly successful. However, research proves there is predictable “routine” insider selling that does not convey any useful information for outside investors. Therefore, investors need to learn how to strip away these so-called “routine” insider sales, which make up a huge part of the overall insider trading activity, and compile a set of information-rich trades that contain strong predictive power. That’s the reason why Insider Monkey ignores insider selling conducted under pre-arranged trading plans or selling related to freshly-exercised stock options. Thus, the following article will lay out a list of three companies that recently registered possible information-rich insider selling.
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).
Healthy Oil and Gas E&P Company Registers Insider Selling
Pioneer Natural Resources (NYSE:PXD) saw two executives unload shares this week, so let’s try to find out what might have triggered the recent insider selling. Timothy L. Dove, President and Chief Operating Officer, discarded 13,254 shares on Wednesday at prices ranging from $152.00 to $152.77 per share, cutting his overall holding to 271,993 shares. Jerome D. Hall Jr., Executive Vice President of Permian Operations, sold 1,600 shares on Tuesday at prices that fell between $149.45 and $150.44 per share. After the recent sale, Mr. Hall currently holds a stake of 23,428 shares.
The independent oil and gas exploration and production company has seen its market capitalization spike by 20% since the beginning of 2016. In mid-June, Pioneer Natural Resources (NYSE:PXD) announced it was acquiring roughly 28,000 net acres in the Midland Basin from Devon Energy Corp (NYSE:DVN) for $435 million. In connection with the acquisition and the much-needed recovery in crude oil prices, Pioneer anticipates to increase its horizontal rig count to 17 from 12 in the northern Spraberry/Wolfcamp by the end of 2016. The company previously said it would add five-to-ten rigs should crude oil prices recover to $50 per barrel.
The number of hedge fund vehicles followed by Insider Monkey with equity investments in the oil and gas E&P company rose to 61 from 57 during the January-to-March quarter. Those 61 asset managers accumulated almost 14% of the company’s outstanding common stock at the end of March. Stephen Mandel’s Lone Pine Capital was the owner of 1.33 million shares of Pioneer Natural Resources (NYSE:PXD) at the end of March.
The next page of this article will reveal the insider selling registered at two other companies.