PulteGroup Inc. (PHM) and United Rentals Inc. (URI) Register Voluminous Insider Sales, Plus Three Companies with Insider Buying

What does the term “insider trading” mean and why do investors need to keep track of insider trading behavior? Insider trading involves the buying and selling of equity securities by individuals who hold access to material, non-public information. While insider trading activity can be both legal and illegal, this distinction is not very important for non-insiders monitoring insider trading metrics.

Let’s move on to the question of whether investors should keep tabs on insider trading behavior or not. Indeed, corporate insiders, namely board members and executives, have a better understanding about their companies’ business operations and future prospects than any of us, so their spur-of-the-moment transactions can serve as great tips for outsiders. There aren’t many reasons corporate insiders are purchasing shares in their own companies, with the primary reason being that these highly-informed individuals believe their companies’ shares are severely undervalued. On the other hand, insiders can sell shares for any number of reasons that may have noting to do with market conditions and firm-specific developments. However, as corporate insiders usually follow the patter of “buying low and selling high”, spontaneous insider selling should be closely monitored by the investment community as well. That said, let’s have a look at a group of noteworthy insider transactions reported with the SEC on Wednesday.

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).

Asset Bank Holding Company Sees Two Board Members Purchase Shares

Bank of Commerce Holdings (NASDAQ:BOCH) had two corporate insiders pile up shares earlier this week. To start with, freshly-appointed board member, Karl L. Silberstein, acquired a new stake of 3,500 shares on Wednesday at a price tag of $6.57 each. Joseph Q. Gibson, a long-serving board member, snapped up 5,000 shares on the same day for $6.52 each, lifting his overall holding to 101,488 shares.

In early March, the asset bank holding company and parent company of Redding Bank of Commerce completed the purchase of five Bank of America branches located in Northern California. Bank of Commerce Holdings (NASDAQ:BOCH) paid a cash consideration of $6.7 million and acquired $155.2 million in assets, mainly comprised of cash and premises. The acquisition provided the bank roughly $142.3 million of new liquidity, a portion of which was used to reduce the bank’s reliance on brokered and wholesale borrowings. Michael M. Rothenberg’s Moab Capital Partners acquired a new stake of 71,079 shares of Bank of Commerce Holdings (NASDAQ:BOCH) during the March quarter.

The second page of this article will reveal the insider buying activity recorded at two companies, while the last page will discuss fresh insider selling at two other companies.

Newly-Appointed CEO of This Biotechnology Company Purchases New Stake

The freshly-appointed CEO of ContraFect Corp (NASDAQ:CFRX) initiated a new stake earlier this week, a purchase most probably dictated by the company’s stock ownership guideline. Precisely, Chairman and CEO Steven C. Gilman, snatched up a 20,000-share stake on Wednesday at $2.48 apiece.

The biotechnology company that develops protein and antibody therapeutics for life-threatening, drug-resistant infectious diseases recently offered 14 million shares of common stock and accompanying warrants to purchase up to 14 million shares at a combined public offering price of $2.50 per share and related warrant. ContraFect Corp (NASDAQ:CFRX) plans to use the roughly $32.2 million in net proceeds from this offering to fund the clinical development of its lead product candidate called CF-301, the advancement of the company’s portfolio that includes CF-404, as well as the discovery of additional product candidates. CF-301 is a lysin for the treatment of Staph aureus bacteremia, while CF-404 is being developed for the treatment of life-threatening seasonal and pandemic varieties of influenza. ContraFect has lost approximately half of its market value since the beginning of 2016. Adage Capital Management, founded by Phillip Gross and Robert Atchinson, had 1.50 million shares of ContraFect Corp (NASDAQ:CFRX) in its portfolio at the end of March.

Parent Company of an Independent Commercial Bank Also Witnesses Some Mild Insider Buying

Access National Corporation (NASDAQ:ANCX) saw one member of its executive team buy some shares earlier this week. Mark D. Moore, the President of the company’s primary subsidiary Access National Bank, purchased 3,287 shares on Monday at a price of $21.67 per share, lifting his stake to 3,687 shares.

The parent company of independent commercial bank Access National Bank, which also has three active wholly-owned subsidiaries under its umbrella, has seen its stock gain 9% since the beginning of the year. Access National Corporation (NASDAQ:ANCX) recently reported second-quarter net income of $4.88 million, which increased from $3.98 million posted a year ago. This marked the company’s 64^th consecutive quarterly profit. Moreover, the company’s boardroom approved a quarterly cash dividend of $0.15 per share, consistent with its objective to maintain a 40%-to-50% payout ratio. The dividend equates to an annual dividend yield of 2.68%. Jim Simons’ Renaissance Technologies LLC had 169,700 shares of Access National Corporation (NASDAQ:ANCX) amongst its pool of holdings on March 31.

U.S. Homebuilder Sees Current CEO Offload Massive Block of Shares

PulteGroup Inc. (NYSE:PHM) witnessed some heavy insider selling this week, so let’s find out who has been jettisoning shares at an alarming pace lately. Chairman and CEO Richard J. Dugas Jr., who is set to retire from his role as CEO in May 2017 in part due to a leadership change demanded by the homebuilder’s founder and his grandson, offloaded a massive amount of 243,115 shares on Monday at prices ranging from $21.80 to $22.12 per share, cutting his direct ownership stake to 1.28 million shares.

Just recently, analysts at JPMorgan upgraded the U.S. homebuilder to ‘Overweight’ from ‘Neutral’ and raised the price target on the stock to $26 from $18, saying that the company’s decision to boost its share buyback authorization by $1.0 billion to $1.5 billion should drive above-average growth in per-share earnings in 2017. PulteGroup Inc. (NYSE:PHM) recently revealed plans to slow land acquisition and use cash flows from operations to fund repurchase of $1.5 billion worth of shares over the next six quarters. PulteGroup’s shares are 22% in the green year-to-date. Edgar Wachenheim’s Greenhaven Associates had 4.34 million shares of PulteGroup Inc. (NYSE:PHM) in its portfolio on March 31.

Construction Rental Companies Registers Noteworthy Insider Selling

United Rentals Inc. (NYSE:URI) has also witnessed increased insider selling over the past several weeks, so let’s have a look at the most recent activity. Dale A. Asplund, Chief Information Officer and Senior Vice President of Business Services, discarded 17,972 shares on Tuesday at prices varying from $78.24 to $78.71 per share. After the recent sale, Mr. Asplund currently owns 15,009 shares.

The recent insider selling comes after the largest equipment rental company in the world released a strong second-quarter earnings report. United Rentals Inc. (NYSE:URI) has seen the value of its stock gain 9% so far in 2016. In mid-June, analysts at Citigroup raised their price target on the construction rental company to $85 from $72 and reiterated their ‘Buy’ rating, citing demand growth that is “modestly” outpacing GDP and reduced supply operating as a tailwind. “We believe the overall rental rate backdrop continues to improve, reflective of the tightening supply/demand balance”, said Citigroup analysts back in June. Ray Carroll’s Breton Hill Capital owns 10,842 shares of United Rentals Inc. (NYSE:URI) as of the end of the second quarter.

Disclosure: None