Battered Performance Sports Group Ltd (PSG) and Two Strong-Performing Companies Witness Insider Buying

According to fresh data from CNBC, the dollar value of all insider purchases in April has been the lowest in the past 11 months or so. Meanwhile, the ratio of insider selling over insider buying thus far in April has been the highest in the same 11-month period. Corporate insiders have sold 38-times more stock than they bought thus far in April, which is not particularly promising considering the long-lasting uncertainty in financial markets. The dollar volume of both insider buying and selling was even lower in the April of 2015. This rather unusual insider trading activity is fairly simple to explain, considering that April is a heavy-earnings period. Numerous stock market watchers and investors pay close attention to insider buying, as there appears to be only one reason directors and officers buy their companies’ shares on the open market: they believe those shares are undervalued. Insider Monkey processed all Form 4 filings involving insider buying submitted with the SEC on Thursday and identified three companies with noteworthy insider purchases.

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).

High-Flying Biotechnology Company Witnesses Insider Buying

Five Prime Therapeutics Inc. (NASDAQ:FPRX) had not witnessed any insider buying for quite some time until this week. Franklin M. Berger, Board member since September 2010, bought 6,090 shares on Tuesday at prices that ranged from $46.70 to $47.23 per share, lifting his ownership to 79,980 shares.

The clinical-stage biotechnology company currently has three product candidates in clinical development: FPA008, which is being studied in clinical trials as a monotherapy in joint disease called PVNS (pigmented villonodular synovitis), as well as in multiple cancers in combination with Bristol-Myers Squibb Co (NYSE:BMY)’s cancer immunotherapy drug Opdivo; FPA144, designed to treat patients with gastric cancer; and FP-1039, studied in Phase 1b clinical development to treat patients with malignant pleural mesothelioma. During the 2016 American Association for Cancer Research (AACR) Annual Meeting that took place several days ago, Five Prime Therapeutics Inc. (NASDAQ:FPRX) presented new preclinical data on FPA144. The presentation showed that FPA144 “can drive an anti-tumor response that involves multiple immune cell types”, so the company plans to evaluate this product candidate in tumors types beyond gastric cancer.

The shares of the biotechnology company have gained an impressive 100% in the past 12 months and are up 17% thus far in 2016 alone. The hedge fund sentiment towards Five Prime increased during the December quarter, with the number of money managers from our database invested in the company climbing to 23 from 20 quarter-on-quarter. Those 23 funds accumulated almost 29% of the company’s total number of outstanding shares at the end of 2015. Adage Capital Management, founded by Phillip Gross and Robert Atchinson, reported ownership of 2.33 million shares of Five Prime Therapeutics Inc. (NASDAQ:FPRX) through the round of 13Fs for the final quarter of 2015.

Let’s head to the next pages of this insider trading article, where we will discuss the insider buying registered at Performance Sports Group Ltd (NYSE:PSG) and ServisFirst Bancshares Inc. (NASDAQ:SFBS).

Struggling Sporting Goods Retailer Registers Insider Buying

Performance Sports Group Ltd (NYSE:PSG) also witnessed one member of its Board pile up more shares this week. Director C. Michael Jacobi purchased 11,830 shares on Tuesday and 19,000 shares on Wednesday at prices varying from $3.48 to $3.60 per share. After the recent purchases, Mr. Jacobi continues to own 33,830 shares.

The developer and manufacturer of ice hockey, roller hockey, lacrosse, baseball and softball sports equipment has seen its market value plummet by 64% since the beginning of 2016, mainly due to the downwardly-revised outlook for fiscal 2016 released in early March. Precisely, the company issued a press release in early March disclosing that it had lowered fiscal 2016 adjusted EPS guidance to the range of $0.12-to-$0.14 per diluted share from the range of $0.66-to-$0.69. The significantly-reduced outlook was mainly related to three primary factors: a write down of the receivable balance from sporting goods retailer Sports Authority Inc. that filed for bankruptcy, as well as the possible loss of sales from this retailer; weakness in the baseball and softball market; and additional bad debt reserves for certain U.S. hockey customers. The grim near-term outlook issued by the company put significant pressure on its shares, and it is not entirely clear whether there is a light at the end of the tunnel at this point in time.

Performance Sports Group anticipates continued challenges in its U.S. baseball and softball business, which were experienced in the third quarter of fiscal 2016 that ended February 2016 when revenues declined 8% year-on-year to $126.1 million. There were nine hedge funds tracked by Insider Monkey with stakes in the sporting goods retailer, which amassed nearly 6% of its outstanding shares. Charles Paquelet’s Skylands Capital upped its position in Performance Sports Group Ltd (NYSE:PSG) by 76% during the March quarter to 1.02 million shares.

Strong-Performing Bank Company Has Board Member Buy Some Shares

ServisFirst Bancshares Inc. (NASDAQ:SFBS) is the third company witnessing insider buying discussed in this article. Michael D. Fuller, Director on the Board of ServisFirst Bank of Birmingham, reported purchasing 1,075 shares on Thursday at prices that fell between $49.90 and $50.11 per share, of which 25 shares are held directly by a corporation owned by Mr. Fuller’s adult daughters that currently owns 444,025 shares. After the recent purchase, Mr. Fuller holds a direct ownership stake of 174,968 shares. It should be noted that the bank holding company that operates 18 full-service banking offices has advisory boards in each of its six primary markets.

The company’s net income has been growing consistently in the past several years, with the bottom-line figure increasing to $63.54 million in 2015 from $52.38 million in 2014, $41.62 million in 2013 and $34.45 million in 2012. ServisFirst Bancshares, which recently joined the S&P SmallCap 600 Index, generated $17.65 million for the first quarter of this year, so the company appears to be on track to deliver a higher bottom-line figure for 2016. Meanwhile, the company pays out a quarterly dividend of $0.08 per share, which equates to a dividend yield of only 0.65%. However, the bank increased its payout ratio in the past three years to 10.0% in 2015 from 9.6% in 2014 and 8.8% in 2013, which makes us believe the company will keep increasing the payout in the years ahead should bottom-line results continue to improve.

The number of funds with long positions in the company (among those we track) declined to six from ten during the December quarter. The shares of ServisFirst Bancshares have gained 41% in the past year and trade around 16.0-times expected earnings, above the forward PE multiple of 13.5 for the Financials sector. Royce & Associates LLC, founded by Chuck Royce, owned 175,000 shares of ServisFirst Bancshares Inc. (NASDAQ:SFBS) at the end of 2015.

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