Tracking insider trading activity should play an important role in an investors’ stock selection process, especially for those who are not long-term oriented like Warren Buffett. Insider trading may offer some useful insights on how companies’ insiders feel about the near-term future stock performance of these companies. This article will primarily focus on the insider selling activity registered at three companies this week. It is commonly known that insiders sell stock for numerous reasons that are not related to their companies’ valuations and anticipated stock performance, so it is very difficult to interpret this type of activity. Even so, the timing of certain insider sales may still suggest that insiders do not anticipate any positive firm-specific developments that could result in sharp price appreciation of their companies’ stock in the near-term. So let’s proceed with the discussion of the insider sales registered at the aforementioned companies.
Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does besides providing high-quality articles. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
To start out, NVIDIA Corporation (NASDAQ:NVDA) has registered a sizable insider sale this week. Director Mark A. Stevens reported the sale of a 200,000-share block on Monday at a weighted average price of $31.04, which was held by the 3rd Millennium Trust. After the recent sale, the trust fund, where the Director and his wife serve as co-trustees, currently holds 1.85 million shares. The Director also owns a direct ownership stake of 25,040 shares. The shares of NVIDIA have advanced by 55% since the beginning of the year, which reflects the company’s success in shifting from being a PC-leveraged GPU supplier to a multidimensional visual-computing company. NVIDIA’s gaming business has been firmly growing despite facing a struggling PC market. However, most of the company’s future growth may come from its NVIDIA DRIVE PX platform, which is a car computer that enables self-driving capabilities. NVIDIA Corporation (NASDAQ:NVDA) is currently partnering with more than 50 companies in connection with this product, so its wide array of growth opportunities clearly justify the company’s rich trailing price-to-earnings ratio of 29.09 (the ratio for the S&P 500 Index stands at 23.12). A total of 34 hedge funds tracked by Insider Monkey had stakes in the company at the end of the third quarter, which stockpiled a mere 3.40% of its outstanding shares in aggregate. Israel Englander’s Millennium Management added a 2.00 million-share position in NVIDIA Corporation (NASDAQ:NVDA) to its portfolio during the third quarter.