Caterpillar Inc. (CAT), ConocoPhillips (COP) and Infinera Corp. (INFN) Insiders Pile Up Shares, Plus Striking Insider Selling at 2 Companies

Although much research shows that security purchases on the part of corporate insiders tend to beat broader market benchmarks, Insider Monkey does not recommend blindly mimicking each insider purchase. Nevertheless, insider trading behavior can serve as an important add-on tool in one’s securities analysis process and can be used to support a larger investment thesis. Just like well-known short-seller Jim Chanos uses executive departures to reinforce his bearish theses on certain companies, heavy insider buying can be used to reinforce a larger bullish investment thesis as well.

Furthermore, retail investors can also screen insider buying, particularly clusters of buying, as a stock selection procedure. Battered companies witnessing noteworthy insider buying may represent strong investment candidates that require further research. Meanwhile, there are dozens if not hundreds of reasons corporate insiders may want to sell shares of their companies. For instance, an insider might want to diversify his or her holdings, purchase a new house, or take an expensive vacation. Nonetheless, as corporate insiders usually follow the pattern of “buying low and selling high”, there is good reason to believe that most insiders sell shares when they believe their company’s valuation is approaching or exceeding a “true” or “correct” value. That said, let’s have a look at several noteworthy insider transactions reported with the SEC earlier this week.

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).

Two Insiders of Fiber-Optic Networking Equipment Vendor Pile Up Shares

Infinera Corp. (NASDAQ:INFN) had two different insiders purchase shares earlier this week. To begin with, John P. Daane, a Member of the company’s Board of Directors since January, acquired a new stake of 12,000 shares on Monday for $8.49 each. More importantly, Chief Executive Officer Thomas J. Fallon snapped up 100,000 shares on the same day at prices varying from $8.48 to $8.57 per share, lifting his ownership to 1.11 million shares.

The maker of optical transport networking equipment, software and services has lost 52% of its market value since the beginning of the year. The shares of Infinera took a hit after the company warned of “concerning signs of slowing demand in the primary markets” that it serves alongside with its second quarter results, which topped analysts’ estimates. Just recently, analysts at Needham & Co. cut their price target on the company to $15 from $20 but reiterated their ‘Strong Buy’ rating on it, saying that “we are going to hold our nose and ride out the trip to the sewers; we think much of this is temporary.” Concourse Capital Management, run by Joseph Mathias, upped its position in Infinera Corp. (NASDAQ:INFN) by 89% during the June quarter, to 65,049 shares.

The second page of this article will disclose two companies with fresh insider buying, while the third page of the article will discuss the insider selling at two other companies.

Major U.S. Shale Producer Registers Some Insider Buying

ConocoPhillips (NYSE:COP) also registered a notable insider purchase a couple of trading sessions ago. Board member Arjun N. Murti snatched up 6,500 shares on Monday at $39.72 apiece. After the recent purchase, Mr. Murti currently owns 19,000 shares.

ConocoPhillips, one of the largest U.S. shale producers, has seen the value of its stock decline by 14% since the start of the year. The independent exploration and production company reported a second quarter net loss of $1.1 billion, compared to a net loss of $179 million recorded a year earlier. This marked the fifth-consecutive quarterly loss for ConocoPhillips (NYSE:COP), mainly owing to depressed crude oil prices. The Houston-based company also posted second quarter revenue of $5.58 billion, a fall of 35% year-over-year and widely missing analysts’ expectations of $6.73 billion. ConocoPhillips also reduced its 2016 capital spending plan by $200 million to $5.5 billion. Donald Yacktman’s Yacktman Asset Management was the owner of 4.30 million shares of ConocoPhillips (NYSE:COP) at the end of the second quarter.

Well-Known Heavy Equipment Maker Witnesses Insider Buying After Lowering Forecast

Caterpillar Inc. (NYSE:CAT) was yet another company that registered insider buying during recent trading sessions. Board member Dennis A. Muilenburg bought 1,930 shares on Friday for $82.75 each, boosting his overall holding to 9,558 shares.

The shares of the heavy equipment maker, best known for its yellow excavators, are up by 20% in 2016. Just recently, Caterpillar Inc. (NYSE:CAT) lowered its full-year sales and profit forecast amid sluggish demand in mining and other industries. The recovery in commodity prices has not translated into increased mining activity or an increase in demand for equipment just yet, as mining companies are presumably trying to strengthen their balance sheets first. The world’s largest construction and mining equipment maker anticipates full-year sales in the range of $40.0 billion-to-$40.5 billion, down from its most recent guidance range of $40 billion-to-$42 billion issued in April. Ray Carroll’s Breton Hill Capital owns 11,900 shares of Caterpillar Inc. (NYSE:CAT) as of the end of the second quarter.

The final page of the article will discuss the insider selling at Knight Transportation and Meredith Corporation.

Massive Insider Selling Registered at Provider of Truckload Transportation

There was immense insider selling registered at Knight Transportation (NYSE:KNX) over the past few trading sessions. Kevin P. Knight, Executive Chairman of the company’s Board and one of the four cousins who founded the U.S. truckload motor shipping carrier in 1990, sold 235,700 shares on Friday, 131,800 shares on Monday, and 132,500 shares on Tuesday at prices that fell between $28.31 and $30.07 per share. After these transactions, Mr. Knight currently holds an indirect ownership stake of 3.35 million shares through a trust fund. The freshly-sold shares were also held in Mr. Knight’s trust fund.

The provider of full truckload transportation and logistics services has seen its market capitalization jump by 18% year-to-date. In early July, analysts at Credit Suisse downgraded Knight Transportation (NYSE:KNX) to ‘Neutral’ from ‘Outperform’ and reduced their price target on the stock to $26 from $28, citing industry overcapacity, weak pricing, as well as mounting uncertainty around consumer spending in the second-half of the year. Ken Griffin’s Citadel Advisors LLC had 415,000 shares of Knight Transportation (NYSE:KNX) among its pool of holdings at the end of March.

Top-Tier Executives Offload Shares of Leading Media and Marketing Company

Meredith Corporation (NYSE:MDP) saw its most influential and informed executives offload shares earlier this week. To begin with, Chief Financial Officer Joseph H. Ceryanec discarded his entire stake of 9,145 shares on Monday at prices between $53.79 and $54.35 per share. Moreover, Chairman, President and CEO Stephen M. Lacy sold 46,283 shares on the same day at prices of between $53.79 and $54.53 per share, trimming his overall holding to 6,674 shares.

The insider selling comes shortly after the leading media and marketing company released its financial results for its fiscal year 2016 ended June 30. Meredith Corporation (NYSE:MDP) reported total revenue of $1.65 billion for the fiscal year, up from $1.59 billion recorded a year earlier. This fiscal 2016 figure represents the company’s highest top-line figure in its history and Meredith anticipates improving upon that further in fiscal 2017, guiding for a revenue increase in the mid-single digits. Meredith shares are 23% in the green year-to-date. Ken Fisher’s Fisher Asset Management reported owning 957,780 shares of Meredith Corporation (NYSE:MDP) through the latest 13F filing period, for the June quarter.

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