Fresh statistics reveal that last week’s volume of insider buying increased significantly week-over-over, despite the markets enjoying a three-day rally last week, which makes us think that corporate insiders do not want to miss out on a potential bull-run in U.S equities. Last week’s insider selling activity also increased relative to the previous week, but the ratio of insider selling to insider buying still dropped quite noticeably week-over-week. This outcome is great news for investors and other market participants, as the recent surge in insider buying seems to suggest that high-ranking executives believe in the strength of the U.S economy and in the health of its stock market. With that in mind, the following article will focus on the recent insider buying activity witnessed at three companies, as well as discuss the performance of the companies in question.
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 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).
Let’s begin our discussion with Blackbaud Inc. (NASDAQ:BLKB), which had a member of its Board of Directors buy a large number of shares last week. Director Peter J. Kight purchased 8,469 shares on Wednesday and 52,175 shares on Thursday at prices that ranged from $53.41 to $57.18 per share, lifting his overall holding to 74,149 units of common stock. The shares of the provider of software and services for the philanthropic community are up by 21% over the past 12 months despite losing 14% since the beginning of 2016. The company’s portfolio of software and services supports non-profit fundraising and relationship management, eMarketing, advocacy, accounting, and payments and analytics, among other things.
Blackbaud Inc. (NASDAQ:BLKB) had a great 2015 in terms of both stock and financial performance, as its total revenue grew by 13% year-over-year to $637.9 million. The transition of the company’s solutions portfolio to the cloud spurred additional growth last year and the company’s management anticipates 2016 non-GAAP revenue to be in the range of $725.0 million to $740.0 million. The South Carolina-based company also intends to expand its addressable market in the upcoming years, which will most likely unlock additional revenue streams. The stock trades at a rather rich forward P/E multiple of 24.10, which is well above the ratio of 14.20 for the Information Technology industry. However, investors should keep in mind the company’s pace of growth, which seems to justify the rich valuation. Last week, research firm Wunderlich initiated coverage on Blackbaud with a ‘Buy’ rating. Robert Joseph Caruso’s Select Equity Group acquired a new stake of 535,024 shares in Blackbaud Inc. (NASDAQ:BLKB) during the final quarter of 2015.