Do These Selling Insiders Know Something You Don’t?

The U.S stock markets have registered their worst ever start to a year, so one may wonder why corporate insiders are not taking part in the major equities sell-off. In fact, data reveals that last week’s dollar volume of insider selling has been the lowest in the past four years or so. What can we make of this phenomenon? Most likely, corporate insiders have not scared away by the deepening stock market correction and have confidence in their shares to rebound long-term. Nonetheless, one should not forget the extremely high insider selling activity registered during the last several months of 2015, which could have served as a warning for investors. Although insider selling is relatively hard to interpret, this type of activity should not be overlooked, as it may reveal a broader change in sentiment towards equities. While exploring the insider trading database available on our website, the Insider Monkey team has identified three companies that reported noteworthy insider sales in the past week. Hence, this article will focus on the insider sales registered at those three companies and the recent performance of the companies in question.

Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period, hedge funds’ top small-cap stocks beat the S&P 500 index by double digits annually (read the details here).

Carnival Corp (NYSE:CCL) had three different executives sell big last week, which might raise red flags for some investors. To begin with, Stein Kruse, Chief Executive Officer of the company’s Holland America Group since December 2013, sold 26,560 shares on Friday at a weighted average price of $49.92, cutting his overall holding to 73,183 shares. Secretary and General Counsel Arnaldo Perez unloaded 12,749 units of common stock on the same day at a weighted average sale price of $49.92 and currently holds 57,767 shares. Last but not least, Chief Financial Officer David Bernstein discarded 16,467 shares on Friday for $49.92 each. After the recent sizable sell-off, the CFO currently owns 50,951 shares.

The shares of the cruise company are 7% in the green over the past year despite experiencing a sharp drop earlier this year. Carnival Corp (NYSE:CCL)’s cruise passenger ticket revenue for the nine months that ended August 31, which accounted for 74% of the company’s total revenue, decreased by 2.8% year-over-year to $8.9 billion. The foreign exchange translations greatly impacted Carnival’s top-line results last year, having reduced cruise passenger ticket revenue by $587 million. Leaving the currency impact aside, the company’s top-line results were positively influenced by an increase in cruise ticket pricing, an increase in ALBDs (a measure of passenger capacity), and an increase in occupancy. Analysts anticipate the company to post earnings per share of $3.91 for fiscal year 2016, which assigns the stock a forward price-to-earnings ratio of only 12.55 (the ratio for the S&P 500 companies totals 15.65). The hedge fund sentiment towards the stock was positive in the third quarter, as the number of smart money investors in our system with stakes in the operator of luxury cruise ships climbed to 53 from 49 quarter-over-quarter. Kerr Neilson’s Platinum Asset Management cut its stake in Carnival Corp (NYSE:CCL) by 22% during the third quarter to 7.42 million shares.

Let’s move on to the next two pages of this daily insider trading article, where the insider sales registered at FactSet Research Systems Inc. (NYSE:FDS) and Sportsman’s Warehouse Holdings Inc. (NASDAQ:SPWH) are discussed.