CMS Energy Corporation (CMS), Boeing Co (BA) and Sykes Enterprises (SYKE) Had Executives Offload Shares This Week

With an increase in the usage of equity-based compensation, company executives and Board members sell shares for a variety of reasons beyond just their companies’ current developments and future prospects. This means that it is extremely cumbersome to find the actual reason behind each insider sale, which makes insider selling metrics seem obsolete. Past research shows that long runs of consecutive insider purchases or sales are quite frequent, which means that insider trading behavior can be easily implemented in one’s stock analysis process. Studies show that the odds in favor of an insider purchase being followed by another purchase are three times greater than being followed by a sale. Similarly, the odds in favor of an insider sale being followed by a sale are twice greater than being followed by a purchase. As a result, insider selling can still offer some insights about how directors and executives feel about their companies’ future performance. Insider Monkey processed most Form 4 filings submitted with the SEC this Thursday and identified three companies with noteworthy spontaneous insider selling.

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).

Energy Company’s CFO Sells Massive Block of Shares

CMS Energy Corporation (NYSE:CMS) had one of its most informed executives offload a massive block of shares earlier this week. Thomas J. Webb, Executive Vice President and Chief Financial Officer, sold 100,000 shares on Wednesday at prices that fell between $41.36 and $41.61 per share, which trimmed his overall holding to 256,163 shares.

CMS Energy is a Michigan-focused energy company that operates several subsidiaries, including Consumers, an electric and gas utility, and CMS Enterprises, an independent power producer. The shares of the energy company have advanced 24% in the past 12 months without taking a hit from the recent broader market sell-off. This low volatility stock offers great capital protection amid broader market sell-offs, but most stocks in the same “low volatility” category may seem too expensive. CMS Energy Corporation (NYSE:CMS)’s shares are currently changing hands at around 18.9-times expected earnings versus the forward P/E multiple of 16.5 for the electric utilities sector, so this energy stock isn’t overly expensive. The company recorded net income of $164 million for the first quarter of this year, down from $202 million reported for the same period of the prior year. The decrease in the bottom-line figure was mainly driven by lower electric and gas deliveries, which were due to the second-warmest winter in consumers’ history. The decrease was partly offset by the impact of electric and gas rate increases.

CMS Energy pays out a quarterly dividend of $0.31 per share, which equates to a current dividend yield of 3.01%. The number of hedge funds tracked by Insider Monkey with stakes in the Michigan-based company dropped to 10 from 18 during the December quarter. Murray Stahl’s Horizon Asset Management reported owning 31,062 shares of CMS Energy Corporation (NYSE:CMS) through the latest round of 13Fs.

The next pages of this article will discuss the insider selling activity registered at Boeing Co (NYSE:BA) and Sykes Enterprises Incorporated (NASDAQ:SYKE).

Boeing Witnessed Some Insider Selling This Week

Boeing Co (NYSE:BA) had two top executives sell shares this week, one of whom, disposed of freshly-vested stock options. Raymond L. Conner, Vice Chairman of Boeing and Chief Executive Officer and President of Boeing Commercial Airplanes, unloaded 8,109 shares on Tuesday at $132.09 apiece, cutting his ownership to 120,176 shares.

The recent insider selling comes after the aircraft manufacturer released its first-quarter earnings report. Boeing’s earnings from operations for the first quarter decreased $584 million year-on-year to $1.03 billion, while operating margins dropped to 7.2% from 10.5% year-over-year. The decrease in earnings and operating margins was mainly driven by an additional reach-forward loss of $162 million related to the KC-46A Tanker, which is developed from the company’s 767 wide-body passenger jet. This after-tax charge follows a $536 million post-tax charge announced in July, which was said to reflect higher engineering and manufacturing costs to complete the tanker’s development, certification and initial production. The first-quarter earnings were also impacted by higher research and development costs related to the 777X and an additional one-off charge related to the 747 long-haul jet.

Boeing and other aircraft manufacturers in the commercial space have been facing lower-than-expected demand for large commercial passenger and freighter aircraft, which resulted in fewer orders than previously anticipated. Therefore, Boeing plans to eliminate 4,000 jobs from its commercial division by the end of the year. Boeing shares are down 8% since the beginning of 2016 and trade at a forward PE multiple of 13.9, which is below the comparable ratio of 16.5 for the aerospace and defense sector. Ken Fisher’s Fisher Asset Management owns 220,199 shares of Boeing Co (NYSE:BA) as of March 31.

Sykes Enterprises Had Executives Offload Shares This Week

Sykes Enterprises Incorporated (NASDAQ:SYKE) is yet another company that saw a member of its executive team unload a sizable block of shares this week. Lawrence R. Zingale, Executive Vice President and General Manager of Major Markets, filed on Thursday to disclose the sale of 36,000 shares at a price of $29.00 per share, which trimmed his overall holding to 52,837 shares.

The provider of comprehensive customer contact management solutions and services has seen its market value gain 18% in the past 12 months. However, the stock has not done too much on the upside since November, after registering an impressive run in the past several years. In July, Sykes Enterprises completed the acquisition of Qelp B.V. and its subsidiary for a total of $15.8 million in an attempt to extend and strengthen its service portfolio around digital self-service customer support, as well as expand the physical reach of its operations. In the April of this year, the company also completed the acquisition of Clear Link Holdings LLC and its subsidiaries, which operate one of the leading inbound demand generation and sales conversion platforms. Despite these acquisitions, Sykes Enterprises’ revenues for the first quarter declined to $320.75 million from the $323.69 million recorded for the same quarter of 2015. The company plans to discuss the future contribution from Clearlink when it releases the second-quarter earnings report.

Sykes shares are priced at 14.4-times expected earnings, slightly below the forward PE multiple of 16.0 for the Information Technology sector. Jim Simons’ Renaissance Technologies had 644,300 shares of Sykes Enterprises Incorporated (NASDAQ:SYKE) in its equity portfolio at the end of 2015.

Disclosure: None