Strong Insider Trading in American Eagle Outfitters Inc. (AEO)

Imitating insider transactions is most profitable when it’s based on large transactions made by several insiders. Purchases by several insiders imply a consensus (agreement) that the shares are undervalued. Large transactions also signal insiders’ conviction about their decision to buy shares even though this doesn’t make sense in terms of diversification.

American Eagle Outfitters Inc. (AEO) had three different insiders purchasing a total of 620,000 shares in September. Jay L Schottenstein bought 500,000 shares at a low price of $13.58 per share on September 8^th. The dollar value of this transaction is $6.8 million. On the same day, Roger S. Markfield bought 10,000 shares at $13.52. Following these two insiders, Michael G Jesselson purchased 110,000 shares at prices between $14.70 and $14.30. It’s notable that his first transaction was at $14.7 and he made other purchases as the shares went down 3% following his first transaction.

From 10-K:

Founded in 1977, American Eagle Outfitters^® is a leading apparel and accessories retailer that operates more than 1,000 retail stores in the U.S. and Canada, and online at ae.com^®. Through its family of brands, AEO, Inc. offers high quality, on-trend clothing, accessories and personal care products at affordable prices. Our online business, AEO Direct, ships to 75 countries worldwide.

American Eagle Outfitters^® boasts a passionate and loyal customer base ranging from college students to Hollywood celebrities. The Company focuses on delivering the right product at the right price, combined with a philosophy of operational excellence and discipline across the organization.

As of January 30, 2010, we operated 938 American Eagle Outfitters stores in the United States and Canada, 137 aerie stand-alone stores and 28 MARTIN+OSA stores.