Ally Financial Inc. (ALLY) and Two Other Companies Receive Vote Of Confidence from Management and Board

The U.S. Securities and Exchange Commission requires all companies’ officers, Board members and shareholders owning at least a 10%-stake to disclose any purchases or sales of their companies’ shares. Insider Monkey strongly believes that the individuals running a company have a competitive edge over non-insiders when it comes to trading that company’s securities, so the investment community should pay close attention to heavy or noteworthy insider buying. However, retail investors should take notice of who is buying the shares, as Chief Executive Officers’ share purchases on the open market are far more informative and indicative of future performance than those conducted by hedge fund managers or activists (especially considering their recent underperformance). All in all, directors and executives generally buy shares of their company on the open market because they consider those shares attractively priced, or simply undervalued. That being said, this article will digest the recent insider buying witnessed at three companies, as well as discuss the recent performance of those companies.

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).

Executives and Board Members at ADMA Biologics Participate In Public Offering – Vote Of Confidence

To start with, ADMA Biologics Inc. (NASDAQ:ADMA) saw four different insiders purchase shares earlier this week. James Mond, Chief Scientific and Medical Officer, purchased 700 shares on Tuesday for $6.50 each, slightly lifting his holding to 3,389 shares. Chief Financial Officer Brian Lenz snapped up 2,500 shares on the same day at $6.50 apiece, which boosted his ownership to 8,500 shares. More importantly, President and Chief Executive Officer, Adam S. Grossman, bought a whopping amount of 200,000 shares on Tuesday, all of which are held indirectly through Areth LLC and Hariden LLC. After the recent purchase, the CEO holds an indirect ownership stake of 843,668 shares. Lastly, Director Jerrold B. Grossman, former CEO of ADMA Biologics on a part-time basis between 2007 to October 2011, filed Thursday to disclose the purchase of 45,769 shares at $6.50 apiece, all of which are held by the 2012 Nevada Trust.

The aforementioned members of management and Board of Directors purchased shares through an underwritten public offering of 1.89 million shares, so this cluster of buying is not the type of insider buying investors should look for. However, insiders’ participation in excess of 10% in the offering may point to their confidence in the future prospects of the late-stage biopharmaceutical company. ADMA Biologics Inc. (NASDAQ:ADMA) focuses on developing specialty plasma-based biologics for the treatment and prevention of certain infectious diseases.

The company’s lead product candidate, called RI-002, has been designed for the treatment of Primary Immune Deficiency Disease, a genetic disorder that causes a deficient or absent immune system. ADMA Biologics has completed a pivotal Phase III clinical study on this drug candidate, after which the company submitted a Biologics License Application (BLA) for RI-002 to the U.S. FDA during the third quarter. The FDA could approve the BLA within one year of the filing date, which means it could be approved by the end of this summer, with possible first commercial sales occurring starting from the fourth quarter. Dennis Purcell’s Aisling Capital owned 3.61 million shares of ADMA Biologics Inc. (NASDAQ:ADMA) on December 31.

Let’s head to the next pages of this article, where we will discuss the insider buying registered at Sterling Construction Company Inc. (NASDAQ:STRL) and Ally Financial Inc. (NYSE:ALLY).

Sterling Construction’s CEO Buys $500,000 Worth of Stock through Public Offering

The man in charge of Sterling Construction Company Inc. (NASDAQ:STRL) was caught buying a massive block of shares earlier this week. Chief Executive Officer Paul J. Varello bought 125,000 shares on Wednesday at a price of $4.00 per share, boosting his overall holding to 737,203 shares. Mr. Varello purchased the aforementioned block of shares through a public offering of 4.50 million shares, so this purchase does not necessarily suggest that the shares of Sterling Construction are undervalued. Instead, the purchase shows that the CEO is ready inject some of his own capital into the future growth of the company, which also represents a bullish indicator to some extent.

The company operates as a heavy civil construction company that focusses on building and reconstructing transportation and water infrastructure projects such as highways, roads, bridges, as well as water, wastewater and storm drainage systems. Sterling Construction plans to use the capital raised from the offering to cover working capital needs, repay indebtedness outstanding under the revolving loan portion of its equipment-based credit facility and cover general corporate expenses. The company had $27.27 million in long-term debt at the end of March, which bears interest at an initial fixed annual rate of 12%. Meanwhile, the indebtedness under the revolving loan portion of the credit facility totaled $13.10 million.

Sterling Construction’s core business heavily relies on Federal and state fund, so the company may benefit from the recent passage of the federally funded five-year $305 billion surface transportation bill that is set to increase the annual federal highway investment by 15.1% over the next five-year period. The stock is up 6% in the past 12 months despite having lost 28% year-to-date. Charles Paquelet’s Skylands Capital upped its stake in Sterling Construction Company Inc. (NASDAQ:STRL) by 8% during the March quarter to 96,082 shares.

Three Insiders at Ally Financial Bought Shares This Week

Ally Financial Inc. (NYSE:ALLY) registered a cluster of insider buying earlier this week that may be worth the attention of the investment community. To start with, Director Marjorie Magner bought 1,000 shares on Wednesday at $16.72 apiece, which lifted her stake to 21,218 shares. Chief Financial Officer Christopher A. Halmy snapped up 6,000 units of common stock on Wednesday at prices varying from $16.88 to $16.91 per unit, after which Mr. Halmy owns 161,749 units. Furthermore, Chief Executive Officer Jeffrey Jonathan Brown filed this week to disclose the purchase of 12,000 shares, which were bought on Wednesday at prices that ranged from $16.80 to $16.82 per share. After the recent purchase, Mr. Brown currently holds a 368,244-share stake.

Ally Financial, the former financing arm of General Motors Company (NYSE:GM), currently focuses on two markets: auto-lending and direct online banking. The company’s banking subsidiary, Ally Bank, is a leading franchise in the fast-growing direct (internet, telephone, mobile, and mail) banking market. In early April, Ally Financial sealed an agreement to acquire online brokerage and digital wealth management company TradeKing Group for roughly $275 million. This acquisition is aimed at expanding Ally Financial’s product offerings by adding online brokerage and digital wealth management. As the company focuses on becoming the premier digital financial services company, the aforementioned acquisition seems perfectly suited considering that half of Ally’s customers said they would consider a digital wealth management solution. Moreover, the digital wealth management market is anticipated to reach $7 trillion by 2020, so the company does have room for growth here. In the meantime, Ally shares have dropped 24% in the past 52 weeks. Andy Redleaf’s Whitebox Advisors reported ownership of 1.05 million shares of Ally Financial Inc. (NYSE:ALLY) in its 13F filing for the March quarter.

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