Insider buying activity has been extremely weak in the past several weeks as U.S. publicly-traded companies were gradually unfolding their financial results for the second quarter. As the Dow Jones Industrial Average and Standard and Poor’s 500 Index are racking up new all-time highs, corporate insiders are not so enthusiastic about buying shares of their own companies. The recent volatility and global uncertainty might have left most investors left wondering what to do next, but surely one can find attractive investment opportunities in equity markets despite trading at all-time highs.
Insider buying registered at certain companies recently hit by sharp sell-offs post-earnings or after other disappointing announcements may point to attractive investment opportunities indeed. While there appear to be dozens of reasons corporate insiders sell shares in their own companies, there aren’t many reasons why insiders buy their companies’ stock. As a general rule, corporate insiders are buying shares in an attempt to generate good trading profits, either because they believe their companies’ shares are severely undervalued or because they anticipate great prospects ahead. Last week’s volume of insider buying more than tripled compared to the dollar volume recorded for the prior week, which implies that there are certain companies viewed by insiders as poised to go higher in the foreseeable future. Leaving this discussion aside, let’s lay out a list of five companies that witnessed noteworthy insider trading activity in the past several trading sessions.
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 imitating 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).
Regional Bank Registers Cluster of Insider Buying after Merger Announcement
F.N.B. Corp (NYSE:FNB) had three different insiders purchase shares this past week, a cluster of insider buying the investment community should definitely have a look at. To start with, William B. Campbell, Lead Independent Director since January 2012 and former Chairman, purchased 1,100 shares on Friday at a price tag of $11.98 each, lifting his overall holding to 82,771 shares. Director D. Stephen Martz snapped up 1,000 shares on Thursday for $11.97 each, which boosted his stake to 127,268 shares. Last but not least, Frank C. Mencini, yet another member of the company’s boardroom, bought 1,000 units of common stock on Friday at $11.97 apiece. After the recent purchase, Mr. Mencini currently owns 9,850 units of common stock.
The cluster of insider buying comes shortly after the diversified financial services company announced an agreement to buy Yadkin Financial Corp (NYSE:YDKN) in an all-stock transaction valued at $1.4 billion. The acquisition of the North Carolina-based bank holding company and parent of Yadkin Bank will offer the acquirer $7.5 billion in total assets, $5.3 billion in total deposits, $5.4 billion in total loans, as well as 100 banking offices located in North Carolina and South Carolina. FNB shares are down 9% thus far in 2016. Israel Englander’s Millennium Management owned 2.00 million shares of F.N.B. Corp (NYSE:FNB) at the end of March.
Little-Known Financial Services Company Sees Chairman Buy Some Shares
Shore Bancshares Inc. (NASDAQ:SHBI) also saw a member of its boardroom pile up some shares last week. Christopher F. Spurry, Chairman of the company’s Board, purchased 1,000 shares on Friday at $11.82 apiece, increasing his ownership stake to 20,867 shares. Mr. Spurry’s spouse owns a total of 1,047 shares of the $1.1 billion-asset financial holding company.
The largest independent financial services company on the Delmarva Peninsula has seen its market value jump by 6% since the start of 2016. Shore Bancshares Inc. (NASDAQ:SHBI) recently released its second-quarter earnings report, which showed that the company’s net income increased to $2.27 million from $1.63 million reported a year ago. However, the company’s second-quarter bottom line was lower than the $2.46 million figure recorded for the first quarter. The quarter-over-quarter decrease reflects slightly lower non-interest income due to insurance agency contingent commissions that are typically received in the first quarter of the year. Matthew Lindenbaum’s Basswood Capital had nearly 639,000 shares of Shore Bancshares Inc. (NASDAQ:SHBI) among its holdings on March 31.
Let’s head to the second page of this insider trading article, where we will reveal noteworthy insider selling recently registered at three companies.