Wells Fargo & Co (WFC) and Two Other Giant Companies with Intensive Insider Selling

There aren’t so many things that can spur more anxiety among investors than witnessing their high-conviction stock picks register massive insider selling. Truth be told, if I had my hard-earned capital invested into a company’s stock, I would definitely be troubled by heavy insider selling at that company. However, insider selling activity may be sometimes wrongly interpreted by market participants, considering that directors and executives can cash out their holdings for a wide range of reasons that have nothing to do with their companies’ fundamentals or future prospects. Investors mostly focus on the fact that insiders sell shares, without attempting to figure out why those insiders might have sold shares in the first place. Of course, it is nearly impossible to find out the reason behind each insider sale, which is why insider trading watchers should be very careful when making conclusions based in insider selling activity. Insider Monkey processed dozens of Form 4 filings submitted with the SEC on Thursday and pinned down three companies with voluminous 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).

This REIT Had Executive Sell Massive Block of Shares Earlier This Week

Let’s begin our discussion by having a look at one insider sale registered at Crown Castle International Corp (NYSE:CCI). Philip M. Kelley, Senior Vice President – Corporate Development and Strategy, unloaded 46,951 shares on Wednesday at prices that fell between $87.16 and $87.94 per share, which cut his overall holding to 95,010 shares.

Crown Castle International represents a real estate investment trust that owns, operates and leases shared wireless infrastructure, including towers and rooftops, as well as small cell networks supported by fiber. At the end of December, CCI owned, leased and managed roughly 40,000 towers and 16,000 fiber miles across the United States. In the April of this year, the REIT acquired Tower Development Corporation in an all-cash deal valued at $461 million, after which it received possession of 336 towers in the U.S. and Puerto Rico. The REIT currently pays out a quarterly dividend of $0.885 per share, which equates to a currently dividend yield of 4.08%. Just recently, CCI’s Chief Executive Officer said the REIT is well-positioned to generate compound annual organic growth in adjusted funds from operations (AFFO) and dividends per share in the range of 6%-to-7% over the next several years, thanks to the innovation and adoption of wireless connectivity.

Crown Castle International, which buys and manages a portfolio of cell towers that are rented to carriers such as AT&T Inc. (NYSE:T), is seen as the ‘cleanest’ play on U.S. mobile infrastructure spending. Shares of CCI are nearly flat year-to-date, but they have gained 106% in the past five years. Charles Paquelet’s Skylands Capital cut its stake in Crown Castle International Corp (NYSE:CCI) by 5% during the March quarter to 626,750 shares.

The concluding pages of this article discuss the insider selling at Honeywell International Inc. (NYSE:HON) and Wells Fargo & Co (NYSE:WFC).

The Insider Selling Activity at This Industrial Giant Gains Steam

Honeywell International Inc. (NYSE:HON) saw three different officers unload shares this week, but two of them sold solely freshly-exercised stock options. Thomas A. Szlosek, Chief Financial Officer and Senior Vice President, sold 28,317 shares on Wednesday at prices ranging from $114.81 to $114.91 per share, trimming his ownership to 35,323 shares.

The aforementioned insider sale comes shortly after the industrial conglomerate posted better-than-anticipated first-quarter financial results on Friday and announced a $5 billion share buyback program on Monday. Honeywell raised the low-end of its revenue and earnings per share guidance for 2016, which makes us believe the company appears is well on track to register the seventh consecutive year of higher EPS results. The industrial giant anticipates full-year 2016 sales in the range of $40.3 billion-to-$40.9 billion, which implies a year-over-year growth of 4%-to-6%. Adjusted earnings per share are expected to fall in the range of $6.55-to-$6.70, which would mark an increase of 7%-to-10%. Several weeks ago, Honeywell International decided to abandon its $90 billion-offer to acquire industrial peer United Technologies Corporation (NYSE:UTX), after facing strong opposition from the target, antitrust regulators and major customers. Instead, Honeywell’s Board authorized the repurchase of up to $5 billion worth of shares.

Soon after the release of the company’s first-quarter earnings report, numerous financial hubs raised their price targets on the industrial giant. For instance, analysts at Jefferies reiterated the ‘Buy’ rating on Honeywell and raised the price target to $130 from $120. Similarly, Oppenheimer increased the price target to $128 from $120, while RBC Capital Markets upped the target to $122 from $121. Honeywell shares are up 10% year-to-date. Ken Fisher’s Fisher Asset Management reported owning 418,639 shares of Honeywell International Inc. (NYSE:HON) in the latest round of 13Fs.

Wells Fargo Witnessed Multiple Insiders Sell Shares This Week

Wells Fargo & Co (NYSE:WFC) had two executives offload massive blocks of shares earlier this week. To begin with, James M. Strother, Senior Executive Vice President of the General Counsel Legal Group at Wells Fargo, sold 40,000 shares on Wednesday for $50.77 each, cutting his ownership to 218,584 shares. Moreover, Avid Modjtabai, Senior Executive Vice President of Well Fargo’s Consumer Lending Group and Operations Group, unloaded 55,000 shares on the same day at prices that fell between $50.77 and $50.81 per share, all of which were held through a trust fund that currently owns 364,802 shares.

The third-largest bank in the U.S. based on assets has seen its market value decline almost 8% since the beginning of 2016. The bank’s revenues for the first quarter of this year were $22.2 billion, which increased 4% year-on-year mainly due to the acquisition of loan books from General Electric Company (NYSE:GE)’s GE Capital. Meanwhile, first-quarter net income declined to $5.46 billion from $5.80 billion reported last year. Let us remind you that Wells Fargo was among the five banks whose so-called living wills, which represent plans explaining how banks would go bankrupt without destabilizing the financial system, were “not credible or would not facilitate an orderly resolution” in a possible crisis. As a result, the Federal Reserve and Federal Deposit Insurance Corporations requested the five banks, including Wells Fargo, to re-design their living wills by October 2016.

Well Fargo’s stock is priced at 11.4-times expected earnings, slightly above the forward PE multiple of 10.9 for the Diversified Banks sector. Earlier this week, the bank announced an increase of its quarterly dividend by 1% to $0.38 per share, which equates to a dividend yield of 3.04%. Ken Fisher’s Fisher Asset Management owns 19.10 million shares of Wells Fargo & Co (NYSE:WFC) as of March 31.

Disclosure: None