Two Packaging and Container Companies Highlight Fresh Insider Selling; Plus Noteworthy Insider Purchases

The history shows that corporate insiders’ purchases of their own companies’ stock tend to beat stock market gauges on aggregate. Corporate insiders, namely Board members and executives, usually purchase shares for one simple reason – they believe their companies’ shares are greatly undervalued by Mr. Market. This theory or statement appears to make perfect sense, as it is quite hard to come up with other explanations on why insiders would spend their hard-earned money to buy their own companies’ stock.

Another possible explanation involves stock ownership guidelines imposed by many companies, which require executives and Board members to own a certain amount of equity in their own companies. So one conclusion that can be drawn from the second possible explanation for insider buying is that retail investors should keep track of insider buying conducted by long-term serving employees. Meanwhile, corporate insiders sell shares for a wide variety of reasons beyond just their companies’ current development or future prospects, owing to the increased usage of equity-based compensation. Nonetheless, heavy insider selling, particularly in the form of clusters of selling, may serve as an indication that insiders believe their company’s share price is approaching or even exceeding a “correct” or “fair” value. That said, let’s look into several noteworthy insider transactions reported with the SEC on Monday.

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).

Liquidating Diversified REIT Registers Insider Buying

Winthrop Realty Trust (NYSE:FUR) has seen one Board member buy shares consistently over the past several weeks or so. Thomas F. McWilliams, a member of the company’s Board of Trustees since 2008, snapped up 2,000 shares on Thursday at $8.71 apiece, lifting his overall holding to 28,546 shares. Mr. McWilliams purchased an additional 2,000 shares in mid-July for $8.72 each.

The diversified real estate investment trust adopted a plan of liquidation in late April of 2014 in an attempt to maximize shareholder value. Winthrop Realty Trust (NYSE:FUR) holds 10 consolidated operating properties as of May 1, three of which are under contract for sale, eight equity investments and four loans receivable. In early July, the REIT announced the sale of its 550,000 square foot warehouse property located in Jacksonville, Florida for $10.50 million. The REIT has paid shareholders $7.75 per share in liquidating distributions since the adoption of its plan of liquidation. Jim Simons’ Renaissance Technologies LLC had 1.22 million shares of Winthrop Realty Trust (NYSE:FUR) in its portfolio at the end of March.

The Current CEO of This Low-Priced Company Buys Shares from Former CEO

The man in charge of Acorn Energy Inc. (OTCMKTS:ACFN) made a relatively sizable purchase this past week. President and CEO Jan H. Loeb purchased 93,637 shares on Friday at a price tag of $0.15 each, boosting his ownership stake to 1.06 million shares. Mr. Loeb purchased the shares in a privately negotiated transaction from the company’s former CEO, who resigned in early 2016.

The holding company focused on technology driven solutions for energy infrastructure asset management has seen the value of its stock gain 90% since the beginning of 2016. Acorn Energy Inc. (OTCMKTS:ACFN) provides sonar and acoustic related solutions for energy, defense and commercial markets through its DSIT Solutions Ltd. subsidiary, as well as power generator monitoring products and services through its OmniMetrix LLC subsidiary. The company’s revenue for the first quarter of 2016 increased by $1.05 million year-over-year to $4.76 million, reflecting increased revenue at both subsidiaries. The increase in revenue at DSIT was related to a $15.4 million project received in the first quarter of 2015 for Hull Mounted Sonar (HMS) systems and an Anti-Submarine Warfare (ASW) Trainer for an unnamed navy.

The second page of this article will discuss fresh insider selling recorded at three other companies.

Supplier of Packaging Solutions Registers Insider Selling

Sonoco Products Co (NYSE:SON) had four different insiders offload shares this past week, three of whom sold freshly-exercised stock appreciation rights. Board member John E. Linville unloaded 33,746 shares on Friday at prices varying from $51.45 to $51.61 per share. 23,746 shares of the freshly-sold block were held through a charitable lead annuity trust (CLAT). After the recent transactions, Mr. Linville currently owns a direct ownership stake of 223,787 shares.

The provider of consumer packaging, industrial products, protective packaging and packaging supply chain services has seen its shares advance by 25% since the start of 2016. Sonoco Products Co (NYSE:SON)’s Board of Directors recently approved a quarterly dividend of $0.37 per share, which yields 2.89% annually. Sonoco recorded net sales of $1.21 billion for the second quarter, down 3.4% year-over-year. The decrease reflects lower selling prices due to lower raw material costs, the closure of one of its packaging services centers in Mexico, and currency headwinds. Ray Carroll’s Breton Hill Capital upped its stake in Sonoco Products Co (NYSE:SON) by 49% during the June quarter to nearly 18,000 shares.

Sensor Designer and Manufacturer Has Executive Offload Entire Stake

James O’Toole, President of the Communications Solutions segment of TE Connectivity Ltd (NYSE:TEL), sold out his entire stake of 13,925 shares on Monday at $61.40 apiece.

The insider selling comes shortly after the sensor designer and manufacturer released its financial results for the fiscal third quarter that ended June 24. The company reported net sales of $3.12 billion for the quarter, flat compared to the same period of the prior year. Growth in the Industrial Solutions and Transportation Solutions segments was offset by a weaker Communications Solutions segment. TE Connectivity Ltd (NYSE:TEL) anticipates net sales in the range of $3.25 billion-to-$3.45 billion for the fiscal fourth quarter 2016. D.E. Shaw & Co. L.P., founded by David E. Shaw, was the owner of 2.48 million shares of TE Connectivity Ltd (NYSE:TEL) on March 31.

Manufacturer of Containerboard and Corrugated Packaging Sees Two Executives Offload Shares

Packaging Corp Of America (NYSE:PKG) had two executives discard shares last week. To start with, Thomas W. H. Walton, Senior Vice President of Sales and Marketing for Corrugated Products, sold 9,000 shares on Friday at prices ranging from $73.50 to $74.05 per share, cutting his overall holding to 34,344 shares. Kent A. Pflederer, Senior Vice President, General Counsel and Secretary, discarded 1,100 shares on the same day for $74.30 each, after which he continues to own 34,623 shares.

The shares of the fourth-largest producer of containerboard and corrugated packaging products in the U.S. are 17% in the green year-to-date. Just recently, analysts at Deutsche Bank downgraded Packaging Corp Of America (NYSE:PKG) to ‘Hold’ from ‘Buy’ and reduced their price target on the stock to $73 from $75, citing limited upside. Deutsche Bank outlined several downside risks for the company, including cost inflation for the company’s major costs that include pulpwood, energy, chemicals and wastepaper. Ken Griffin’s Citadel Advisors LLC had roughly 727,000 shares of Packaging Corp Of America (NYSE:PKG) among its holdings at the end of the first quarter.

Disclosure: None