Cluster of Insider Sales at IT Research Firm – Should You Sell? Guys at Baron Say No; Plus Other Insider Trading

Academics and analysts have been suggesting that one can become a better investor by learning how to monitor and interpret insider trading metrics. Thanks to some regulatory changes made in the not-so-distant past, it’s rather easy for everyone to find out whether a company’s top executives are buying or selling shares. But should we bother about what insiders do with their company’s shares?

Indeed, it would be nice to know if a company’s CEO and his or her colleagues are putting their own capital on the line before making your own investment. A number of research studies found that insider buying represents a powerful indicator that shares will climb. Moreover, insider trading pundits recommend that investors look for clusters of buying by multiple insiders, insider buying by long-serving employees as the stock price rises, and to avoid insider transactions conducted under pre-arranged trading plans. One could find further recommendations on how to find meaningful insider trading and analyze insider transactions, but those mentioned above seem to be the most important. With this in mind, let’s focus our attention towards a set of noteworthy insider transactions reported with the SEC on Thursday.

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CEO of Provider of Hospitality Software Solutions and Services Buys Shares

The man at the helm of Agilysys Inc. (NASDAQ:AGYS) acquired his first shares in the company earlier this week. Ramesh Srinivasan, appointed as the company’s President and CEO in mid-December 2016, snapped up a block of 9,576 shares on Tuesday and an additional 50,424 shares on Wednesday at prices varying from $9.19 to $9.91 per share. The shares are held in the Ramesh and Sujatha Srinivasan Living Trust.

Agilysys Inc. (NASDAQ:AGYS), a provider of next-generation hospitality software solutions and services, has seen its shares drop by 10% in the past 12 months. The technology company reported net revenue of $33.45 million for the three months ended December 31, up from $31.31 million reported a year earlier. Meanwhile, the company’s gross profit margin fell by around 417 basis points to 48.6%. When briefly skimming through the company’s financials, one could arrive at the conclusion that Agilysys isn’t likely to face financial hurdles in the near term. The company’s total debt was around $0.3 million at year-end – comprised of capital lease obligations, while cash on hand amounted to $52.7 million. Michael Kaufman’s MAK Capital One was the equity holder of 7.06 million shares of Agilysys Inc. (NASDAQ:AGYS) at the end of December.

The second page of the Friday edition of our daily insider trading article discusses the fresh insider buying at two other companies.

Board Member of Catalent Buys Sizable Block of Shares

One member of Catalent Inc. (NYSE:CTLT)’s nine-member board piled up some shares this week as well. Board member Donald E. Morel bought 10,000 shares on Wednesday at prices ranging from $29.20 to $29.32 per share. Dr. Morel currently owns an aggregate of 18,799 shares after the purchase.

The provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products has seen its market capitalization rise by 22% in the past year. Catalent Inc. (NYSE:CTLT) recently announced the completion of its acquisition of Accucaps Industries Limited, a Canada-based developer and manufacturer of over-the-counter high-potency and conventional pharmaceutical softgels. As Catalent has long-term supply agreements, which represent a revenue stream over a period of years, the company’s backlog shows future service revenues from work not yet completed. The company’s backlog totaled $958.3 million at the end of December, up from $827.5 million on June 30. More importantly, Catalent anticipates recognizing roughly 67% of revenue from the December backlog by the end of June of 2017. Benjamin A. Smith’s Laurion Capital Management trimmed its position in Catalent Inc. (NYSE:CTLT) by 51% during the fourth quarter, to around 989,000 shares.

CFO of Struggling e-Commerce Software Firm Boosts Equity Stake After Share Price Plunge

A well-informed and influential member of ChannelAdvisor Corp (NYSE:ECOM)’s executive team also purchased some shares earlier this week. Chief Financial Officer Mark Cook, former Vice President of Finance and Controller of open-source technology firm Red Hat Inc. (NYSE:RHT), snatched up 10,000 shares on Thursday at a weighted average price of $10.67 per share. Mr. Cook currently owns a total of 105,058 shares.

The insider purchase comes shortly after the shares of the e-commerce software firm plunged by nearly 25% on the day following the company’s release of lower-than-expected financial results for the fourth quarter. ChannelAdvisor Corp (NYSE:ECOM), a provider of SaaS solutions enabling retailer and branded manufacting customers to integrate and manage their merchandise sales across hundreds of online channels, has opted to focus more on larger customers in recent years, but the company has been struggling with execution. The software company has initiated an aggressive overhaul process, shuffling leadership roles and adjusting its pricing strategy. Although demand for ChannelAdvisor’s platform exists, the company has been struggling to close deals due to pricing hurdles and the executive change-ups, among other things. Should investors anticipate an inflection point in 2017? The insider transaction mentioned above seems to suggest so. The shares of ChannelAdvisor are 26% in the red thus far in 2017. Mark N. Diker’s Diker Management added a 175,466-share position in ChannelAdvisor Corp (NYSE:ECOM) to its portfolio during the December quarter.

Let’s head to the last page of this insider trading article, where we’ll focus our attention on the fresh insider selling observed at two other companies.

Cluster of Sales by Multiple Executives at IT Research Firm; Should You Sell? Baron Says No!

A number of corporate insiders at Gartner Inc. (NYSE:IT) have been trimming their stakes in the past several weeks. To start with, Chief Executive Officer Eugene A. Hall discarded a total of 61,181 shares on Wednesday at prices between $100.38 and $101.97 per share. Mr. Hall owns around 1.17 million shares after the sale. David Godfrey, Senior Vice President of Global Sales, offloaded 13,000 shares on Monday at $101.50 apiece, a sale that trimmed his ownership to a mere 6,033 shares.

The portfolio manager of Baron Asset Fund, a mutual fund run by asset management firm Baron, recently discussed their investment in Gartner Inc. (NYSE:IT) in a quarterly letter to investors. According to portfolio manager Andrew Peck, the provider of syndicated information technology research is set to “experience continued revenue acceleration because of easing annual comparisons, improved sales force productivity, and sales tactics that continue to be fine-tuned to match current macroeconomic conditions.” As Gartner generates significant free cash flow and has relatively low balance sheet leverage, the guys at Baron believe the IT research firm will start deploying capital more aggressively via share repurchases or an acquisition. As Gartner’s shares currently trade only a few dollars off their 52-week high of $105.45, one would anticipate a jump in the volume of insider selling at the company. The stock has gained 26% in the past year. Royce & Associates, founded by Chuck Royce, owned nearly 356,000 shares of Gartner Inc. (NYSE:IT) at the end of December.

Executive at U.S. Defense Firm Offloads Huge Amount of Shares

One member of Lockheed Martin Corporation (NYSE:LMT)’s executive team sold off almost his entire ownership stake this week. Richard H. Edwards, Executive Vice President of the company’s Missiles and Fire Control business area, sold 12,000 shares on Tuesday at prices varying from $262.04 to $262.53 per share. Mr. Edwards owns a mere 651 shares following the sale, along with an additional 4,835 shares held via a salaried savings plan.

The shares of the U.S. defense firm have risen by 23% in the past 12 months. The management of Lockheed Martin Corporation (NYSE:LMT) anticipates 2017 net sales to increase in the mid-single-digit range compared to 2016 levels, citing increased production and sustainment volume on the F-35 program. Nonetheless, the higher volume on the F-35 program will hit the company’s operating profit margin, as the program is dilutive to its overall profit margin. As President Donald Trump has repeatedly criticized the $379 billion F-35 program as “out of control”, it could be safer for long-serving employees at Lockheed Martin to diversify their holdings just as Mr. Edwards did. Jim Simons’ Renaissance Technologies acquired a new stake of 680,900 shares of Lockheed Martin Corporation (NYSE:LMT) during the December quarter.

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