There are numerous studies extolling the efficacy of insider trading as a useful metric to judge a company’s investment prospects. The rationale is fairly clear, since the management of a firm knows much more about issues such as manufacturing bottlenecks, supplier issues, the company’s technological edge, and even its industry outlook compared to other investors. When they trade on this information, the trend becomes clearer to other investors. This is why we at Insider Monkey cover insider transactions religiously, and sifted through the dozens of such transactions over the past 24 hours to gather the most prominent insider sales, which involved HubSpot Inc (NYSE:HUBS), RadNet Inc. (NASDAQ:RDNT), and Capella Education Company (NASDAQ:CPLA). It should be borne in mind that insider sales do not generate as powerful a signal as insider purchases, since they can occur due to a much wider set of reasons than an insider purchase.
Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 118% over the last 36 months and outperformed the S&P 500 Index by more than 60 percentage points (see the details here).
Stacey Bishop, who is a Director at HubSpot Inc (NYSE:HUBS), liquidated nearly 28,000 shares of the company yesterday, dropping her total holdings to 466,851 shares. Just this month she has now sold about 123,000 shares of the $1.56 billion technology company, which offers an inbound marketing and sales platform. HubSpot Inc (NYSE:HUBS)’s shares have risen by almost 40% so far this year, so it’s not surprising an insider may be tempted to pull the trigger on some profit taking. Jim Simons‘ Renaissance Technologies is one of the major shareholders of the company, holding about 151,400 shares valued at $7.51 million at the end of the second quarter.
RadNet Inc. (NASDAQ:RDNT)’s Executive Vice President Norman Hames sold 10,000 of his shares yesterday and now has 697,850 shares remaining to his name. Hames too has been selling shares quite frequently this year, with the tally for this month amounting to about 16,000. As for RadNet, the case is quite different than HubSpot’s, considering that the stock price has depreciated by more than 30% year-to-date. In its financial results for the second quarter, the provider of outpatient diagnostic imaging services delivered EPS of $0.08, which was $0.03 short of analysts’ expectations, while revenues of $204.29 million came in $9.1 million ahead of estimates. Richard Mashaal‘s RIMA Senvest Management, which is the largest stockholder of RadNet Inc. (NASDAQ:RDNT) within our database, was bullish on the company during the second trimester, as it hiked its holding by 14% to 3.56 million shares valued at $23.79 million.
Last but not least is Capella Education Company (NASDAQ:CPLA), whose Director Stephen Shank sold about 15,000 shares yesterday, taking the total sold this month to about 46,000. He now has about 402,600 remaining shares. Capella Education Company too has been having a hard time, as the stock has plunged by a little over 35% so far this year, and with this sale it looks like insiders at the company aren’t necessarily holding their breath for an immediate turnaround. Jim Simons’ Renaissance Technologies and Thomas Bancroft‘s Makaira Partners are the two largest stockholders of Capella Education Company (NASDAQ:CPLA) among those that we track, with respective holdings of 978,400 shares valued at $52.51 million and 536,100 shares valued at $28.78 million.
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