Fairmount Santrol Holdings Inc. (FMSA) and General Electric Company (GE) Register Massive Insider Purchases, Plus Three Other Companies with Notable Insider Trading

Past research finds predictable or routine insider trading that is not informative for the future of publicly traded companies, so retail investors monitoring insider trading metrics need to learn how to filter out information-rich trades. But how can investors differentiate between routine insider transactions and informative transactions?

Sales of freshly-exercised stock options and insider sales conducted under pre-arranged trading plans represent a high portion of the routine kind of insider trading. And why are these two kinds of insider trading considered routine? Because the insider selling related to freshly-exercised stock options or pre-arranged trading plans is mainly driven by diversification or liquidity needs. Hence, Insider Monkey believes that spur-of-the-moment insider transactions represent a set of information-rich trades that contain much more information for prices than routine transactions. Presumably, the only reason corporate insiders use their capital to purchase shares in their own companies is that they expect to generate good trading profits, either because they find the shares undervalued or because they anticipate great times ahead for their companies. That said, the following article will lay out a list of five companies that recently registered noteworthy insider transactions.

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).

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Provider of Sand-Based Proppant Solutions Registers Massive Insider Purchase

Fairmount Santrol Holdings Inc. (NYSE:FMSA) registered an extremely voluminous insider purchase earlier this week, the kind of insider buying investors should keep a close eye on. Charles D. Fowler, current Chairman of the Executive Committee of the company’s Board and former CEO, snapped up 1.67 million shares on Tuesday for $5.95 each, lifting his direct ownership stake to 1.71 million shares. Mr. Fowler also holds an indirect ownership stake of 10.13 million shares.

The provider of sand-based proppant solutions has seen the value of its shares skyrocket by 182% since the beginning of 2016, but Mr. Fowler keeps buying shares. Just recently, analysts at Piper Jaffray upgraded Fairmount Santrol Holdings Inc. (NYSE:FMSA) to ‘Overweight’ from ‘Neutral’ and reiterated their $8 price target after the company announced a 25 million-share offering that generated roughly $161 million in net proceeds. Piper Jaffrey cited the share offering as the primary reason behind the upgrade, with the offering being viewed as a deleveraging event. Israel Englander’s Millennium Management LLC held 1.54 million shares of Fairmount Santrol Holdings Inc. (NYSE:FMSA) at the end of March.

The next two pages of this insider trading article will discuss noteworthy insider transactions registered at four other companies.

GE’s CEO Buys a Massive Block of Shares

General Electric Company (NYSE:GE) also witnessed a notable insider purchase this week. The company’s Chairman and CEO, Jeffrey R. Immelt, purchased 50,000 shares on Tuesday at a price tag of $31.45 each. After the recent purchase, Mr. Immelt currently holds an ownership stake of 2.20 million shares.

The industrial giant has seen its market value increase by 19% in the past 12 months, in part due to the company’s successful exit from the majority of its financial services businesses. However, JPMorgan analysts recently issued a bearish note about General Electric Company (NYSE:GE), saying that “…as the hysteria around transformation fades, and the focus shifts to actual numbers, what’s left is a core, fundamental outlook for earnings and FCF that we think is at best stable, at worst deteriorating, and undoubtedly below consensus”. Long story short, JPMorgan considers General Electric as a top underweight. Ken Fisher’s Fisher Asset Management had 31.31 million shares of General Electric Company (NYSE:GE) among its holdings on March 31.

California-Based Bank Holding Company Registers Cluster of Insider Buying

Pacific Premier Bancorp Inc. (NASDAQ:PPBI) recorded a cluster of insider buying this week, which involved three different insiders. To begin with, Thomas Rice, Chief Operating Officer and Executive Vice President, bought 600 shares on Tuesday for $23.98 each, lifting his stake to 12,676 shares. Moreover, Board member Joseph L. Garrett snatched up 840 shares on the same day at a cost of $23.90 per share, a purchase that lifted Mr. Garrett’s ownership to 63,860 shares. Last but not least, Jeff C. Jones, Chairman of the company’s Board, purchased 1,000 shares on Tuesday at a weighted average price of $23.94 per share. Following the recent purchase, the Chairman currently owns 108,693 shares.

The shares of the California-based bank holding company for commercial bank Pacific Premier Bank are 15% in the green since the start of 2016. In late January, Pacific Premier Bancorp Inc. (NASDAQ:PPBI) completed the acquisition of Security California Bancorp in exchange for consideration valued at $120 million. The bank holding company acquired $714 million in total assets, $456 million in loans, as well as $637 million in total deposits. Matthew Lindenbaum’s Basswood Capital owned 1.10 million shares of Pacific Premier Bancorp Inc. (NASDAQ:PPBI) on March 31.

Maker of Reinforcing Steel Wire for Concrete Registers Notable Insider Sale

Insteel Industries Inc. (NASDAQ:IIIN) recently has registered one of its most voluminous insider sales of 2016. Michael C. Gazmarian, Vice President, Chief Financial Officer and Treasurer, discarded 59,723 shares on Tuesday for $34.88 each, trimming his overall holding to 78,013 shares. Mr. Gazmarian also owns 20,760 restricted stock units.

The insider selling comes after the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications released its financial results for its third quarter ended July 2. Insteel Industries Inc. (NASDAQ:IIIN)’s net sales for the quarter decreased by 1.2% year-over-year to $115.6 million, reflecting a 9.8% increase in shipments that was offset by a 10.0% decrease in average selling prices. The increase in shipments was mainly driven by improved market conditions and higher demand, while the decrease in selling prices reflects competitive pricing pressures. Insteel’s shares have gained 65% so far in 2016. Royce & Associates, founded Chuck Royce, owned almost 657,000 shares of Insteel Industries Inc. (NASDAQ:IIIN) at the end of the first quarter.

Lennox International Registers More Insider Selling as Share Price Goes Higher

The insider selling activity at Lennox International Inc. (NYSE:LII) has been increasing as of late along with the company’s share price. Prakash Bedapudi, Chief Technology Officer and Executive Vice President, sold 3,667 shares on Wednesday at a weighted average price of $154.90 per unit, cutting his stake to 12,773 shares. Other top-tier executives also offloaded massive amounts of shares under pre-arranged trading plans.

Lennox International Inc. (NYSE:LII), which activates in the heating, ventilation, air conditioning and refrigeration (HVACR) industry, has seen its market capitalization jump by 26% since the start of the year. The company’s second-quarter top line grew by 3% year-on-year to $1.02 billion. Jim Simons’ Renaissance Technologies had 187,600 shares of Lennox International Inc. (NYSE:LII) in its portfolio on March 31.

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