Corporate insiders, namely Board members and executives, have two primary ways to buy or sell shares in their own companies. One way involves buying and selling shares on the open market and the second one relies on pre-arranged trading plans, usually referred to as 10b5-1 plans. Many U.S. public companies have established blackout and quiet periods, which restrict insiders from buying and selling shares within particular time periods. However, insider transactions conducted under pre-arranged trading plans are not impacted by those blackout and quiet periods, which explains why the dollar volume of insider selling is relatively stable throughout an entire calendar year – insiders usually sell shares by creating the so-called 10b5-1 plans, but they buy shares mostly on the open market. No matter where U.S. equities are heading, retail investors always need to be on the lookout for noteworthy insider buying. After all, there is only one reason corporate insiders purchase shares – they believe their companies’ shares are greatly undervalued by Mr. Market. Without further ado, let’s have a look at several noteworthy insider transactions recorded with the SEC on Monday. So here we have a list of three companies with notable insider buying and a separate list of two companies with relatively noteworthy insider selling.
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).
Joe Papa Bought Sizable Block of Valeant Shares Last Week
Valeant Pharmaceuticals Intl Inc. (NYSE:VRX)’s new President and Chief Executive Officer filed a Form 4 on Monday to report the purchase of a sizable block of shares on the open market. Joseph C. Papa, who has been busy designing and implementing a transformation plan for the embattled drug maker, purchased 202,000 shares on Friday at prices that ranged from $24.06 to $24.88 per share. Mr. Papa currently holds an ownership stake of 2.44 million shares, as he received 2.24 million shares in early May following his appointment.
The Canadian drug maker has seen its market value plunge by 76% since the beginning of 2016, with the company’s first-quarter results, which were said to reflect the disturbances faced by the company over the last nine months or so, putting even more downward pressure on the stock. Nonetheless, Valeant Pharmaceuticals Intl Inc. (NYSE:VRX) has been relatively resilient lately, as only a handful of companies could endure the painful experience suffered by the Canadian drugmaker, which involved scrutiny over steep price increases of certain drugs, a leadership and boardroom reshuffle, as well as worries over the company’s heavy debt load. Bill Ackman’s Pershing Square Capital Management was the owner of 21.59 million shares of Valeant Pharmaceuticals Intl Inc. (NYSE:VRX) at the end of March.
The CEO of Advanced Drainage Systems Also Bought Shares Last Week
The man in charge of Advanced Drainage Systems Inc. (NYSE:WMS) also bought shares this past week. Chairman, President and CEO, Joseph A. Chlapaty, purchased 20,000 shares on Thursday and 45,000 shares on Friday at prices varying from $26.57 to $27.00 per share, all of which are held in a trust fund that currently holds 9.85 million shares. Mr. Chlapaty also reported the purchase of 500 shares effected by his wife. The CEO also holds a direct ownership stake of 182,331 shares.
The shares of the manufacturer of thermoplastic corrugate pipe are up by 7% thus far in 2016. Advanced Drainage Systems Inc. (NYSE:WMS) has performed quite strongly in the past several quarters, as the company registered net sales growth of 11.8% and 17.9% in the last two quarters. The company posted net sales of $1.29 billion for fiscal 2016 that ended March 31, up 9.3% year-over-year. Meanwhile, the top line increased to $26.1 million from $12.8 million reported for fiscal year 2015. PAR Capital Management, founded by Paul Reeder, owns exactly 2.00 million shares of Advanced Drainage Systems Inc. (NYSE:WMS) as of March 31.
Let’s head to the next page of this insider trading article, where we will discuss several noteworthy insider transactions registered at three other companies.
This Bank’s Board Member Bought Shares Last Week
Eric D. Hovde, a member of Bay Bancorp Inc. (NASDAQ:BYBK)’s Board of Directors, bought 50,000 shares on Thursday for $5.15 each, boosting his direct ownership stake to 58,854 shares. Prior to the aforementioned acquisition, Mr. Hovde also acquired 200 shares last Tuesday at $5.05 apiece and 2,400 shares last Monday for $5.02 each. The Board member also holds an indirect ownership stake of 2.78 million shares held through private bank holding company H-Bancorp LLC, of which Mr. Hovde is the Chairman and CEO.
The Maryland-based savings and loan holding company, the parent company of Bay Bank, has seen its market capitalization gain nearly 4% since the beginning of the year. Bay Bancorp Inc. (NASDAQ:BYBK) had total assets of $463 million at the end of March, as compared to $491 million at the end of December and $487 million at the end of March of 2015.
This REIT Had One Executive Sell Shares Last Week
Roger A. Maynard, Executive Vice President of Investments at Equity Lifestyle Properties Inc. (NYSE:ELS), sold 15,000 shares on Thursday at prices that fell between $71.55 and $72.21 per share. After the recent sale, Mr. Maynard continues to own 155,379 shares.
The real estate investment trust that owns and operates manufactured home communities and recreational vehicle resorts and campgrounds has seen its shares gain 9% since the start of 2016. The REIT owned or had an ownership interest in a portfolio of 388 properties across the United States and Canada, which contained 144,231 individual developed areas referred to as sites. Equity Lifestyle Properties Inc. (NYSE:ELS)’s gross investment in real estate increased by $23.0 million during the first three months of 2016 to $4.50 billion, mainly due to increased capital expenditures and the acquisition of Rose Bay RV Resort, which translated into an additional 303 sites. The REIT currently makes a quarterly distribution of $0.425, which equates to an annual dividend yield of 2.33%. Jim Simons’ Renaissance Technologies had 1.03 million shares of Equity Lifestyle Properties Inc. (NYSE:ELS) among its holdings on March 31.
Operator of Outpatient Physical Clinics Registers Insider Selling After a Pause of Several Years
U.S. Physical Therapy Inc. (NYSE:USPH) registered mild insider selling last week after a period of more than six years without any insider selling. Chief Financial Officer Lawrance W. McAfee offloaded 2,000 shares on Friday at prices varying from $59.25 to $59.40 per share, cutting his ownership to 39,212 shares. The stake includes 34,717 restricted shares granted under the company’s equity plan.
U.S. Physical Therapy Inc. (NYSE:USPH) operates outpatient physical therapy clinics that provide preventive and post-operative care, with the number of operated clinics totaling 512 at the end of March. The company’s share price has appreciated 9% so far in 2016. The company’s net revenues for the first three months of 2016 rose to $86.9 million from $77.2 million due to an increase in visits, partially offset by a decrease in the average net patient revenue per visit. Meanwhile, U.S. Physical Therapy’s bottom line for the first quarter was $5.3 million, up from $4.2 million reported for the first quarter of 2015. Royce & Associates, founded by Chuck Royce, nearly halved its stake in U.S. Physical Therapy Inc. (NYSE:USPH) during the March quarter to 312,025 shares.