What Has These Insiders Selling Stock Amid Market Turbulence?

It appears that most investors and insider trading watchers are ignoring the massive insider selling activity of the past few months, and they do provide a strong reason for doing so. Simply put, there are numerous reasons an insider could sell shares, so it is close to impossible to stipulate what exactly propelled that insider’s sale. Nevertheless, the heavy insider selling activity suggests that there may be more to the selling than just the randomness of insiders cashing out for personal reasons, and may hint at general bearishness towards the markets. Corporate insiders are financially-educated people, so the timing of their trades can offer useful insights on how they feel about their companies’ stock and the broader market. With that in mind, this article will discuss the insider selling activity registered at three companies in the last week and the recent performance of the companies in question.

Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does besides providing high-quality articles. We also track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10.0 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. the S&P 500’s 48.7% gain) over the last 38 months (see the details here).

CBRE Group Inc. (NYSE:CBG) witnessed a sizable insider sale earlier this week. Calvin W. Frese Jr., Chief Executive Officer-Americas at CBRE Group, reported selling 25,000 shares on Tuesday for $37.50 each, trimming his stake to 280,042 shares. The performance of the commercial real estate services and investment firm is strongly correlated with economic growth and health of the labor market, along with the sentiment of businesses and investors. The commercial real estate markets have been on a steady recovery path over the past several years, which seems to be reflected in the company’s stock performance. CBRE Group Inc. (NYSE:CBG)’s stock has advanced by 45% over the past two years and by 78% over the past five-year period. However, it appears that the company has a fair valuation at the moment if solely relying on its trailing price-to-earnings ratio of 21.16, which compares with the average of 23.18 for the S&P 500 Index. It might be worthwhile to point out that the company’s sales and leasing professionals are paid on a commission and bonus basis (compensation is CBRE’s largest expense), which allows the company to alleviate some of the negative effects triggered by volatile market conditions. 32 hedge fund investors monitored by the Insider Monkey team had long positions in the company at the end of the third quarter, holding 15.60% of its outstanding common stock. Jeffrey Ubben’s ValueAct Capital held its stake in CBRE Group Inc. (NYSE:CBG) unchanged during the September quarter at nearly 31.33 million shares.

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Let’s head to the next page of this daily insider trading article, which discloses the insider selling activity witnessed at East West Bancorp Inc. (NASDAQ:EWBC) and CSG Systems International Inc. (NASDAQ:CSGS).

East West Bancorp Inc. (NASDAQ:EWBC) saw two top executives cash out holdings this week. To begin with, Executive Vice President Douglas P. Krause offloaded 20,000 shares on Tuesday at a weighted average sale price of $43.55, remaining with 25,791 shares. The Executive VP also holds an indirect ownership stake of 27,997 shares. Furthermore, President and Chief Operating Officer Julia S. Gouw reported selling a 14,743-share block on the same day at $43.55 apiece, which was held through a retirement savings plan. After the recent sell-off, the President holds 58,971 shares.

The shares of the financial bridge between the United States and China are up by 9% in 2015, and are trading at a trailing P/E ratio of only 15.91, which seems to reflect the risks associated with the changes in China’s economy and its monetary policy. Even so, East West Bancorp has been doing great in terms of financial performance this year. Its total assets reached $31.12 billion on September 30, compared to the $28.74 billion that figure stood at on December 31, 2014. The company’s nonperforming assets decreased to $129.8 million from $132.4 million, while its total deposits grew to $26.76 billion from $24.01 billion. Ken Fisher’s Fisher Asset Management cut its exposure to East West Bancorp Inc. (NASDAQ:EWBC) by 4% during the July-to-September period, ending the quarter with 2.91 million shares.

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Let’s wind up our analysis by discussing the insider selling activity at CSG Systems International Inc. (NASDAQ:CSGS). Chief Executive Officer Peter E. Kalan discarded 22,674 shares on Tuesday at a weighted average price of $35.62. Following this sizable transaction, the CEO currently owns 368,064 shares. It is not surprising that insiders are cashing out their holdings at the business support solutions provider, as its shares have advanced by more than 40% this year. The company delivered strong bottom-line growth in the third quarter, even though its revenue increased by only 1% year-over-year. CSG’s revenue increased to $187.0 million from $185.0 million, while its diluted earnings per share grew to $0.50 from $0.15. This growth is mainly attributable to CSG’s cost reduction efforts and the reduction in restructuring and reorganization costs. A high portion of CSG’s revenue is derived from three large service providers, so this high client concentration may be worrisome for some investors. The company anticipates to continue generating most of its revenue from these large clients, so one should still consider the inherent risks associated with this high concentration. A total of 22 smart money investors that we track were invested in CSG at the end of the third quarter. Renaissance Technologies, founded by billionaire mathematician Jim Simons is among the most bullish of those investors of CSG Systems International Inc. (NASDAQ:CSGS), holding 1.87 million shares as of September 30.

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