A Securities and Exchange Commission rule requires corporate insiders to report their securities transactions within 48 hours, but the interpretation of insider trading data has become much more complex in recent years. The proliferation of pre-arranged trading plans and the increased usage of equity-based compensation has made it much more complicated to interpret insider trades, particularly insider sales. Nonetheless, corporate insiders usually buy shares on the open market for one straightforward reason – those shares seem undervalued. Directors and executives may already have exposure to various compensation mechanisms such as stock options, stock appreciation rights (SARs) and phantom stock plans, which means that their compensation increases along with their company’s share price. Therefore, additional buying on the part of executives and directors reveals a high degree of confidence in the future prospects of their companies. Insider Monkey processed the majority of Form 4 filings submitted with the SEC on Monday and identified three companies with the most prominent insider buying.
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).
To start with, Stage Stores Inc. (NYSE:SSI) had its most influential executive purchase a sizable block of shares this past week. President and Chief Executive Officer Michael L. Glazer snapped up 24,556 shares on Friday at prices that ranged from $6.64 to $6.77 per share. After the recent purchase, Mr. Glazer currently has an ownership stake of 628,438 shares.
Stage Stores operates 834 specialty department stores mainly in small and mid-sized towns and communities under the BEALLS, GOODY’S, PALAIS ROYAL, PEEBLES, and STAGE nameplates. The company opened a mere three new stores during 2015 and closed a much higher number of 23 stores. Moreover, Stage Stores announced plans to keep closing stores that do not deliver anticipated sales productivity and profitability. In fact, the multi-year restructuring plan announced in 2015 stipulates the closure of roughly 100 underperforming stores that account for 5% of total sales. A total of 23 stores were already closed in 2015 and roughly 25-to-30 stores are expected to close this year. Stage Stores Inc. (NYSE:SSI)’s sales were $1.60 billion in 2015, decreasing from $1.64 billion in 2014. Comparable sales, which include sales in stores open at least 14 full months and direct-to-consumer sales, decreased by 2.0% in 2015, after increasing 1.4% in 2014. The decrease in comparable sales was mainly driven by a decline in traffic, partly offset by an increase in average unit retail. To be more detailed, sales were hit by decreased consumer demand in markets near the Mexican border due to the depreciation of the Mexican peso, as well as by lower demand in energy-exposed communities in Texas, Louisiana, Oklahoma and New Mexico.
Shares of Stage Stores are down 68% in the past 12 months and currently trade at 12.5-times expected earnings, significantly below the forward P/E multiple of 20.7 for the apparel retail sector. The company pays out a quarterly cash dividend of $0.15 per share, which equates to a current dividend yield of 8.75%. Stage Stores paid roughly $18.65 million in cash dividends in 2015, while net income totaled only $3.78 million for the year. Therefore, some analysts and investors may have concerns over the sustainability of the company’s dividend payment. Even so, Stage Stores’ 2015 bottom-line figure included one-time expenses related to strategic store closures, corporate headquarters consolidation, and workforce reduction initiatives, so the company’s adjusted net income figure was much higher. Moreover, the company’s multi-year plan to close down underperforming stores will most likely have a positive impact on bottom-line figures, which makes us believe that the company’s dividend is not in danger just yet. The hedge fund sentiment towards the retail chain operator declined notably in the December quarter, as the number of funds with stakes in the company dropped to five from 12 quarter-on-quarter. Royce & Associates, founded by Chuck Royce, owns 626,600 shares of Stage Stores Inc. (NYSE:SSI) as of December 31.
Bazaarvoice Inc. (NASDAQ:BV) has seen three different insiders purchase shares thus far in 2016, but we will discuss only the most recent insider buying. Marc Cannon, Executive Vice President – Client Services, bought 10,000 units of common stock on Monday at $3.11 apiece, lifting his ownership to 78,616 units.
Bazaarvoice operates as a data analytics and e-commerce software maker that helps retailers boost sales, market share and brand awareness to some extent by collecting and displaying consumer-generated content such as ratings and reviews, customer stores, social posts, among other things. The company achieved sustained growth in the number of active clients and top-line figures in the past several quarters through the continued expansion of its social commerce platform. Bazaarvoice had revenue of $149.06 million for the nine months that ended January 31, up from $142.86 million reported for the same period of the prior year. The increase in the company’s top-line figure was driven by an increase of $6.4 million in SaaS revenue (fees from the sale of subscriptions to its hosted social commerce solutions), partially offset by a decline in Advertising revenue of $0.2 million. What’s more, the increase in SaaS revenue was attributable to $12.5 million generated from new launches of active clients using the company’s platform and solutions, offset by a decrease in revenue from existing clients due to increased competitive pressure. Bazaarvoice reported 52 net new active client additions for the nine months that ended January 31, while the active client retention rate was 84.2%. This compares with net new active client additions of 196 and active client retention rate of 89.3% reported for the same period of the prior year.
The shares of the e-commerce software maker have lost 46% in the past 12 months and are down 29% year-to-date. Just recently, analysts at Credit Suisse cut the price target on Bazaarvoice to $5 from $9 but reiterated an ‘Outperform’ rating, citing higher-than-expected levels of dollar churn in SaaS, which implies that the company’s SaaS customers are expected to cancel their recurring revenue subscriptions more than expected, and weakening of the advertising business. The smart money sentiment towards Bazaarvoice increased significantly in the final quarter of 2015, with the number of funds tracked by Insider Monkey with stakes in the company climbing to 22 from 14 quarter-on-quarter. Those 22 funds amassed almost 32% of the company’s outstanding common stock at the end of December. Robert G. Moses’ RGM Capital reported ownership of 7.23 million shares in Bazaarvoice Inc. (NASDAQ:BV) through the round of 13Fs for the December quarter.
EVINE Live Inc. (NASDAQ:EVLV) continues to witness more insider buying, which is definitely worth close attention from the investment community. The Insider Monkey team covered the insider transactions of six different insiders at the end of March, as well as discussed the insider purchases of an additional three directors at the beginning of April. What’s more, EVINE Live saw four corporate insiders make purchases this past week, so let’s have a look at the recent insider buying. To begin with, Director Lowell W. Robinson purchased 6,500 shares on Friday at a weighted average cost of $1.17, which lifted his ownership stake to 44,218 shares. Nick Vassallo, Senior Vice President and Corporate Controller, purchased 9,300 shares a day earlier at a weighted average price of $1.21, boosting his holding to 110,730 shares. Moreover, Damon E. Schramm, Senior Vice President, General Counsel and Corporate Secretary, snapped up a 10,000-share block on Friday for $1.2 each, lifting his ownership to 81,375 shares. Last but not least, Director Thomas D. Beers acquired 38,037 shares last Monday at prices that ranged from $1.22 to $1.35 per share, which are held by the Beers Family Trust that currently owns 344,000 shares. Mr. Beers also holds a direct ownership stake of 121,815 shares.
EVINE Live is a digital commerce company that operates a 24-hour television shopping network through which the company offers proprietary, exclusive and name brand products in the following categories: jewelry & watches; home & consumer electronics; beauty; and fashion & accessories. EVINE Live had net sales of $693.31 million in fiscal 2015 that ended January 30, which increased from $674.62 million in fiscal 2014 and $640.49 million in fiscal 2013. The company’s full-time equivalent subscribers, or average homes reached, increased 1% during fiscal 2015, which equates to a 624,000 increase in average homes reached. At the same time, the number of net shipped units grew 9% year-on-year during fiscal 215 to 9.9 million, primarily driven by strong performance from the company’s beauty, and fashion & accessories product categories.
EVINE Live has seen its market value decline 82% in the past 12 month, partially owing to the management’s failure to improve profitability. However, both corporate insiders and shareholders believe the company will embark on a turnaround in the foreseeable future. In a first-quarter letter to investors, Jeffrey Bronchick’s Cove Street Capital LLC, which owns 5.32 million shares of EVINE Live that account for 9.3% of the company’s common stock, said the following about its investment in the company: “While the stock price may indicate otherwise, we do not believe that the value of this company has been permanently impaired; in fact just some basic blocking, tackling and cost cutting should be able to get the company back to generating consistent free cash flow.” A total of 11 hedge funds from our system had stakes in EVINE Live Inc. (NASDAQ:EVLV) at the end of 2015, accumulating approximately 30% of the company’s shares.