There is little doubt that tracking insider trading activity should represent a major part of the stock selection and analysis process of most investors. Some hedge fund vehicles, viewed as the sports cars of the investment world for generating strong returns (albeit they have been struggling to beat stock market gauges in recent years), also incorporate insider trading data into their security analysis process.
Despite the fact that insider buying tends to offer more accurate insights about a company’s prospects than insider selling, the latter type of activity should not be ignored by any means. Although insiders sell shares for numerous reasons unrelated to their company’s future prospects, it is highly unlikely that they ignore the timing of their trades. Why would an insider selling shares today if he/she knows that the upcoming earnings reports will positively surprise the market? The bottom line is that insiders may unload their holdings when there are no major positive developments anticipated at their companies in the near-term future. That being said, this daily article on insider trading will discuss several insider buys and sales reported with the SEC on Monday.
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).
Mini-Cluster of Insider Buying at Provider of Food, Facilities and Uniform Services
Two insiders at Aramark (NYSE:ARMK) purchased shares in the past several trading sessions. To begin with, Board member Stephen I. Sadove purchased 7,500 shares on Thursday at prices ranging from $33.44 to $33.94 per share, lifting his overall holding to 22,488 shares. More importantly, President and CEO Eric J. Foss snatched up 87,566 shares on Monday at prices that fell between $34.25 and $34.79 per share. After the Monday purchase, Mr. Foss currently owns an aggregate of 1.51 million shares.
The bulk of insider buying comes shortly after the shares of the global provider of food, facilities and uniform services plunged due to disappointing results for its fourth quarter of fiscal 2016. Aramark (NYSE:ARMK) reported sales of $3.54 billion for the quarter that ended September 30, slightly down from the $3.55 billion-figure recorded a year ago. The company’s fourth-quarter top line missed analysts’ expectations of $3.67 billion. The Board of Directors of the food, facilities and uniform services specialist approved an 8%-increase in the quarterly dividend to $0.103 per share. The increased quarterly dividend equates to an annual dividend yield of 1.20%. Shares of Aramark are up 6% thus far in 2016 despite suffering a 7%-drop in the past month. Michael Lowenstein’s Kensico Capital was the owner of 8.56 million shares of Aramark (NYSE:ARMK) at the end of the third quarter.
The next two pages of this insider trading article will discuss fresh insider purchases and sales observed at four other companies.