Founder of Battered Rent-to-Own Company Buys Shares After Activist Criticism, Plus Other Noteworthy Insider Trading

Investors have been keeping track of insider trading metrics for decades. After all, corporate insiders tend to have a natural edge over retail investors or analysts when it comes to trading their company’s shares, as insiders usually has a better understanding of their businesses and respective industries than anyone else. Hence, retail investors are always a step behind those “in the know” regardless of how much research you do or how much financial news you read.

If only retail investors could attend a company’s board meeting, they could find out what is really going on behind the scenes. Insider buying metrics have been used as a sign of stock price appreciation for years. On the contrary, insider selling is mostly interpreted as a bearish sign. Indeed, insider buying and selling activity should not be used as the sole indicator when making decisions of buying or selling a company’s stock. Nonetheless, legitimate insider trading could represent a good starting point to further investigate a company’s fundamentals. With that in mind, let’s proceed to the discussion of a set of noteworthy insider transactions reported with the SEC on Friday.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see the details here).

Francisco Amaral Leitao / shutterstock.com

CEO of Struggling Beauty Products Firm Buys Shares – Cluster of Buying Looms

Shortly after Coty Inc. (NYSE:COTY)’s Chief Legal Officer, Greene McMullen, acquired a 40,500-share stake a little bit more than a week ago, the man in charge of the company also piled up some shares. Chief Executive Officer Camillo Pane bought 36,270 Class A shares on Wednesday and 36,080 shares on Thursday at prices varying from $18.42 to $19.91 per share. Mr. Pane currently owns an aggregate of 287,657 shares following these purchases.

The shares of the beauty-product maker have fallen by 34% in the past year, with the recent spike in insider buying coming after the firm’s second-quarter results were released and put additional pressure on the stock. Coty Inc. (NYSE:COTY) said the soft results for quarter that ended December were caused by competitive pressure in the consumer beauty market and “distraction” from the process of absorbing the acquisition of Procter & Gamble Co (NYSE:PG)’s global fine fragrances, salon professional, cosmetics and retail hair color businesses, along with select hair styling brands. The acquisition of P&G Beauty Brands, which brought brands such as CoverGirl under Coty’s umbrella, resulted in higher-than-expected inventory. Ric Dillon’s Diamond Hill Capital upped its position in Coty Inc. (NYSE:COTY) by 53% during the December quarter to 9.88 million shares.

Let’s head to the second page of the insider trading article, where we briefly analyze some insider buying at two other companies.

Founder of Battered Rent-to-Own Company Buys Shares After Being Criticized by Activist Hedge Fund

Undoubtedly the most well-informed executive at Rent-A-Center Inc. (NASDAQ:RCII) snapped up some shares this past week. RAC’s founder Mark E. Speese, who took over the CEO role again on an interim basis earlier this year, bought 76,000 shares on Thursday and 24,000 shares on Friday at a weighted average price of $8.44 per share, with all these shares being held via a partnership. Mr. Speese also holds a direct ownership stake of 744,627 shares.

The insider purchase comes after Glenn W. Welling’s Engaged Capital LLC sent a letter to the company’s Board of Directors in mid-February, criticizing the boardroom as being largely “asleep at the wheel” as operating performance has been deteriorating over the past several years. The activist shareholder was concerned that the founder’s history and personal interest in the furniture and electronics rent-to-own company “may bias him against the careful evaluation of all strategic options” available to the company. In fact, Engaged Capital LLC, which has a 12.9% economic interest in Rent-A-Center Inc. (NASDAQ:RCII) through a combination of shares and swaps, asserted that the most logical step for the company going forward would be to sell the entire company. “There is no shortcut to returning to growth given the nature of this business,” said the hedge fund in the letter. Rent-A-Center, considered the nation’s largest rent-to-own company, has seen its market cap drop by 34% in the past year. Royce & Associates LP, founded by Chuck Royce, held around 443,000 shares of Rent-A-Center Inc. (NASDAQ:RCII) at the end of December.

Board Member at IES Holdings Snaps Up Shares

According to our insider trading data, IES Holdings Inc. (NASDAQ:IESC) hadn’t observed any insider buying since late September 2015 until last week. Todd M. Cleveland, who was appointed as a director at the beginning of the month, purchased 5,000 shares on Wednesday and 4,650 shares on Thursdays at prices between $19.70 to $20.50 per share. Mr. Cleveland owns a total of 137,150 shares after these transactions.

IES Holdings Inc. (NASDAQ:IESC) operates as a holding company that owns and manages various operating subsidiaries comprised of providers of industrial infrastructure services to various end markets. The company recently reported revenues of $192.18 million for the first quarter of fiscal 2017 that ended December 31, up $41.4 million year-over-year. Four business combinations completed during fiscal 2016 added $12.5 million to the top-line figure for the three months that ended December. IES Holdings has enjoyed an increase in backlog over the past 12 months, which has started to materialize into revenue. The shares of IES Holdings have gained 59% in the past year. Royce & Associates LP owned 962,000 shares of IES Holdings Inc. (NASDAQ:IESC) at year-end.

The final page of the insider trading article discusses fresh insider selling observed at two other companies.

Executives at Apple Keep Selling Shares as Optimism About Anniversary iPhone Grows

A number of high-ranked executives at Apple Inc. (NASDAQ:AAPL) have been trimming their equity stakes in recent weeks, a normal occurrence considering the company’s strong stock performance. Craig Federighi, Senior Vice President of Software Engineering, offloaded 70,627 shares on Thursday at a price tag of $135.30 each. Mr. Federighi, who oversees the development of iOS, macOS and Apple’s common operating system engineering teams, owns 439,855 shares after the sale.

The shares of the iPhone maker have enjoyed a stellar performance in 2017, with the shares having gained 17% year-to-date. Apple Inc. (NASDAQ:AAPL)’s shares are trading near their 52-week high of $136.27, which would command some diversification on the part of long-serving employees. Growing optimism about the company’s 10^th anniversary iPhone appears to have propelled Apple shares to record highs, but many have questioned the sustainability of the $130-per-share level. Some are worried that Apple’s largest overseas market – China – has become somewhat saturated. Warren Buffett’s Berkshire Hathaway boosted its stake in Apple Inc. (NASDAQ:AAPL) by 42.13 million shares during the fourth quarter to 57.36 million shares.

Significant Cluster of Insider Selling at Lear Corporation

A number of executives at Lear Corporation (NYSE:LEA) have been unloading shares recently, so let’s have a look at a few transactions. To start with, Jeffrey H. Vanneste, Senior Vice President and Chief Financial Officer, sold 16,734 shares on Wednesday, 5,454 shares on Thursday and 5,603 shares on Friday at prices varying between $139.87 to $143.70 per share, cutting his ownership to a mere 7,472 shares. President and CEO Matthew J. Simoncini liquidated 58,993 shares on Wednesday, 19,229 shares on Thursday and 18,758 shares on Friday at prices between $139.87 and $143.70 per share, as well as offered 1,000 shares as a gift. Mr. Simoncini currently owns an aggregate of 27,151 shares following these transactions. Raymond E. Scott, Executive Vice President and President of Seating, sold 17,353 shares on Wednesday, 5,655 shares on Thursday and 5,812 shares on Friday at prices that ranged from $139.87 to $143.70 per share. Mr. Scott owns 14,133 shares after last week’s transactions.

The leading Tier 1 supplier to the global automotive industry has seen the value of its shares advance by 37% in the past 12 months. Earlier this month, Lear Corporation (NYSE:LEA) agreed to acquire Grupo Antolin’s automotive seating business for €286 million ($304 million) in cash. This business is comprised of just-in-time seat assembly, seat structures and mechanisms and seat trim. Grupo Antolin’s automotive seating business is headquartered in France and has operations concentrated in five European countries. Lear’s Board of Directors recently upped the quarterly cash dividend to $0.50 per share from $0.30 per share, with the upped dividend yielding around 1.40% annually. Ken Griffin’s Citadel Advisors LLC reported owning approximately 754,000 shares of Lear Corporation (NYSE:LEA) through the latest round of 13Fs.

Disclosure: None