Synergy Resources Corp (SYRG) and Two Other Companies with Fresh Insider Selling

Numerous retail investors examine insider buying activity as part of their stock selection and analysis process, but only a few analyze insider selling. Indeed, accurately interpreting insider selling is close to impossible, considering that corporate insiders usually sell shares for a vast number of reasons that have nothing to do with their companies’ valuation or fundamentals. But, if I were investing my hard-earned money into a company’s stock, I would surely be troubled by massive flows of insider selling. Officers and directors are financially-literate individuals who tend to time their purchases and sales of common stock to maximize or at least increase the possible pay-off: why would an insider sell a stock at $10 a share if he or she believes the stock is worth $60? That’s why Insider Monkey tends to interpret noteworthy insider selling, particularly clusters of insider selling, as a sign that companies approach or exceed their “fair” market value. One should note that corporate insiders do not employ any discounted cash flow models to find that “fair” value, but their gut feelings tend to be quite accurate. Moving on to the main purpose of this article, Insider Monkey processed most Form 4 filings submitted with the SEC on Thursday and pinpointed three companies with noteworthy insider selling.

Through extensive research, we have determined that the due diligence that the investors in our database employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also shown that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).

Healthy Oil and Natural Gas Company Witnesses Board Member Sell Massive Block of Shares

Synergy Resources Corp (NYSEMKT:SYRG) has seen one Board member sell big in the past several weeks. Director Robert W. Noffsinger III sold 60,000 shares on Tuesday for $8.07 each, cutting his ownership to 139,965 shares. Mr. Noffsinger sold an additional 16,650 shares at the end of March at a weighted average price of $7.72 per share.

Synergy Resources operates as a growth-oriented independent oil and natural gas company that engages in the acquisition, development and production of crude oil and natural gas in the Denver-Julesburg Basin (D-J Basin) of Colorado. Specifically, the company primarily targets the three benches of the Niobrara formation and the Codell formation for horizontal drilling and production, which are said to have relatively high liquids content. Let’s now have a look at Synergy Resources Corp (NYSEMKT:SYRG)’s balance sheet to see whether the company is well-positioned to endure a sustained low-oil-price-environment. The company had cash and cash equivalents of $80.7 million at the end of November 30, whereas the debt outstanding under its bank credit facility was $78 million. The company also had $85 million available under the same credit facility. However, the independent oil and natural gas company raised $89.1 million through a public offering of 16.1 million shares (including greenshoe options with respect to 2.1 million shares) at the end of January, which were used to repay the capital borrowed under the credit facility. As a result, Synergy Resources currently has a debt-free balance sheet and a borrowing base of $145 million, none of which was drawn in early February. What’s more, the company raised an additional $164.8 million through a separate public offering earlier this month, so Synergy Resources does have a strong balance sheet indeed.

The company’s capital expenditures for calendar year 2016 are expected to be in the range of $130-to-$150 million, most of which will be channeled into drilling 55 gross wells. Based on this capital budget, the company’ average daily production for 2016 is expected to be in the range of 11,000 BOE/day to 12,000 BOE/day, which represents an increase from the average daily production of 8,750 BOE/day for fiscal 2015 that ended August 31. The shares of the independent crude oil and natural gas company have gained 20% in the past three months, but are down 41% in the past 12 months. The number of hedge funds monitored by Insider Monkey with stakes in Synergy Resources declined to 10 from 13 during the December quarter. Israel Englander’s Millennium Management acquired a new stake of 265,879 shares in Synergy Resources Corp (NYSEMKT:SYRG) during the December quarter.

Let’s head to the next pages of this article, where we will discuss the insider selling registered at FactSet Research Systems Inc. (NYSE:FDS) and Darden Restaurants Inc. (NYSE:DRI).

A Popular Company within the Investment Community Has Several Insiders Unload Shares

FactSet Research Systems Inc. (NYSE:FDS) also witnessed some noteworthy insider selling this week, which may be interesting to the investment community. To start with, Joseph E. Laird Jr., Board member since 1993, offloaded 1,500 shares on Wednesday and 1,000 shares on Thursday at a weighted average price of $151.70, cutting his overall holding to 4,500 shares. Moreover, Chief Operating Officer Mark J. Hale sold 1,823 shares on Wednesday at $150.05 apiece, which trimmed his stake to a mere 4,969 shares.

The majority of investors and analysts already know FactSet Research Systems, which operates as a provider of financial information and analytical applications. The company’s applications enable customers to get access to company and industry analyses, multi-company comparisons, portfolio analysis, alpha-testing, portfolio optimization and simulation, among other things. In October 2015, FactSet purchased Portware LLC, a provider of multi-asset trade automation solutions for mega and large asset managers, for roughly $264.8 million. With this acquisition, FactSet’s capabilities have been expanded to include multi-asset trade automation, so it remains to see how the company’s M&A activities will drive growth in the upcoming years. The company’s revenues for the first half of fiscal 2016 that ended February 29 reached $552.30 million, which increased from $490.47 million reported for the same period of the previous year. The increase in revenues was mainly attributable to strong annual subscription value (ASV) growth, which represents growth in forward-looking revenues for the next 12 months from subscription services supplied to clients, sustained client and user additions, strong performance in the Analytics suite of products, as well as revenues from freshly-acquired Portware. At the end of February, the company registered 63,500 users using FactSet, an increase of 6,092 or 10.6% from the second quarter of fiscal 2015. FactSet has registered the fifth consecutive quarter of double-digit user growth, which shows that the company is moving in the right direction.

Shares of FactSet are down 5% since the beginning of 2016, which presumably reflects the possible impact of increased volatility and uncertainty in financial markets on the company’s financial performance. Meanwhile, the stock is priced at around 21.6-times expected earnings, significantly above the forward P/E ratio of 17.4 for the S&P 500 benchmark. The smart money sentiment towards FactSet declined in the final quarter of 2015, with the number of funds from our database invested in the company dropping to 16 from 24 quarter-on-quarter. Jim Simons’ Renaissance Technologies had 379,350 shares of FactSet Research Systems Inc. (NYSE:FDS) in its equity portfolio at the end of 2015.

Darden Board Member Offloads Some Shares

Darden Restaurants Inc. (NYSE:DRI) also saw a member of its Board of Directors offload some shares earlier this week. Director Alan N. Stillman discarded 2,000 units of common stock on Tuesday for $63.5 each. Following this small-sized sale, Mr. Stillman currently owns 3,100 shares. It should be noted that Jeffrey Smith of Starboard Value LP, who managed to replace the entire Board of the owner of full-service dining restaurants in 2014, has also been gradually trimming his firm’s ownership in Darden Restaurants in the past several months. This suggests that the owner Olive Garden and LongHorn Steakhouse restaurants might have reached a rather fair valuation, after implementing efficient cost-cutting measures and spinning-off six 424 restaurant properties into real estate investment trust Four Corners Property Trust Inc. (NYSE:FCPT). Shares of Darden Restaurants have climbed 31% in the past two years, but are down 2% in the past year.

Darden Restaurants reported sales of $5.14 billion for the nine months that ended February 28, which increased from $4.89 billion reported for the same period of the prior year. The increase in the company’s top-line figure was mainly attributable to same-restaurant sales growth of 3.8%, as well as revenue from 7 net new company-owned restaurant since the third quarter of fiscal 2015. Meanwhile, net earnings from continuing operations were $219.3 million for the first three quarters of fiscal 2016, which increased from a mere $78.3 million reported a year ago. Diluted net earnings per share from continuing operations increased to $1.69 from $0.60. What’s more, the company’s Darden same-restaurant sales in fiscal 2016 are expected to grow in the range of 3.0%-to-3.5%. Much of the recent growth experienced by Darden Restaurants has been driven by the strong performance of Italian dining chain Olive Garden.

Shares of Darden currently change hands at around 16.3-times expected earnings, below the forward P/E multiple of 25.1 for the restaurants sector. A total number of 32 money managers tracked by Insider Monkey had stakes in the company at the end of December, amassing nearly 16% of its outstanding common stock. Cliff Asness’ AQR Capital Management owns 3.49 million shares of Darden Restaurants Inc. (NYSE:DRI) as of the end of the final quarter of 2015.

Disclosure: None