Both retail investors and larger-scale investors such as hedge fund managers are armed with a wide range of tools designed to assist their financial analysis capabilities. One such tool is the evaluation of insider trading metrics or patterns. Corporate insiders tend to be completely absorbed in their company’s day-to-day operations, so they usually have first-hand knowledge about their firm’s current performance and future prospects.
On that note, if corporate insiders are buying large chunks of shares in their own company on the open market, then that could serve as a positive signal to the investment community. However, short-term-focused investors need to be aware that corporate insiders tend to have a long investment horizon, partly because of the so-called short-swing profit rule that restricts officers and insiders from making short-term profits by buying and selling shares concomitantly within a six-month period. Hence, investors need to keep in mind that insiders can afford the risk of short-term volatility when they see real bargains.
So should investors follow insiders’ security purchases? If their time horizon is somewhat aligned with that of the company’s management, then insider buying can surely serve as a good indicator. With that in mind, let’s check out a set of noteworthy insider transactions reported with the SEC on Wednesday.
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Board Member of U.S. Seeds and Herbicide Giant Buys Shares After Merger Agreement
One member of Monsanto Company (NYSE:MON)’s Board disclosed the purchase of a relatively sizeable block of shares on Wednesday. Board member Charles S. McMillan bought 3,500 shares on Monday at prices varying from $103.20 to $103.25 per share. Following the recent purchase, Mr. McMillan currently owns 64,009 Monsanto shares.
A little while ago, Bayer AG’s much-scrutinized pursuit of Monsanto Company (NYSE:MON) ended with a $66 billion-merger agreement between the two agri-giants, a deal that could represent the biggest takeover agreement this year and a record overseas acquisition for a German company. However, investors remain unconvinced that the multi-billion-dollar deal will be approved by regulators. The share price of Monsanto’s stock reflects the market’s skepticism, as Monsanto shares remain well below the offer price of $128 per share proposed by the German maker of healthcare and agricultural products. The transaction is anticipated to face tough scrutiny on the part of regulators considering that the three pending megadeals would significantly reduce the number of global players in the agribusiness sector. The shares of the U.S. seeds and herbicide giant are 3% in the green year-to-date. Ken Fisher’s Fisher Asset Management reported owning 2,856 shares of Monsanto Company (NYSE:MON) in its 13F filing for the September quarter.
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The next two pages of this article will discuss the insider trading observed at four other companies.