Heavy Insider Buying At Three Companies That Should Not Be Overlooked

Most U.S.-listed companies have already disclosed their third quarter earnings reports, while the window for insiders to buy and sell stock has been gradually opening as well. This can easily be noticed in the daily and weekly volume of insider trading activity. It is widely known that insiders may sell stock for various reasons, but they buy stock for one simple reason: they believe their companies’ shares will appreciate in the months and years ahead. Of course, insiders’ decisions and judgement might not be in line with the broader market on all occasions, but extensive research has provided evidence that they usually tend to beat the broader market with their purchases. With that in mind, the following article will discuss the recent insider buying activity at three companies pinpointed by the Insider Monkey team.

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Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35%-to-45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. 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 the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned 102% over the ensuing 37 months, outperforming the S&P 500 Index by more than 53 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.

Let’s begin our discussion with DigitalGlobe Inc. (NYSE:DGI), which has seen eight different insiders acquire stock so far this week, though we’ll only analyze the most noteworthy insider trades. To begin with, President and Chief Executive Officer Jeffrey R. Tarr purchased 3,000 shares on Tuesday at a price of $15.80 per share and currently holds 224,219 shares. Executive Vice President and Chief Financial Officer Gary W. Ferrera acquired a 4,000-share block at prices between $15.98-and-$16.50 per share, enlarging his holding to 44,722 shares. Furthermore, Director Warren C. Jenson added 10,000 shares, which were acquired at prices ranging from $16.36-to-$16.39, to his holding that now comprises 33,874 shares. Stephanie Comfort, Senior Vice President, Corporate Strategy, Communications and Marketing, also bought 3,060 shares on Tuesday at a weighted average price of $16.36 and currently owns a 26,757-share stake. These bullish moves come after DigitalGlobe Inc. (NYSE:DGI)’s shares tanked following the company’s release of its third quarter results and its lowered full-year guidance for 2015. The stock is 46% in the red year-to-date, so it appears that insiders are attempting to reassure the market that the company has a great future ahead. Mariko Gordon’s Daruma Asset Management owned a 2.91 million-share stake in DigitalGlobe Inc. (NYSE:DGI) at the end of the second quarter.

The heavy insider buying activity at Healthways and Bank of Commerce Holdings is dicussed on the next page.

Healthways Inc. (NASDAQ:HWAY) is another company that has registered a huge volume of insider buying activity this week. President and Chief Executive Officer Donato J. Tramuto acquired 8,740 shares on Tuesday at a weighted average price of $11.47. He also received a whopping 282,051 shares on Monday, which represent restricted stock units that will vest gradually throughout the upcoming three years. Following these transactions, the CEO currently holds 304,186 shares. Director Lee A. Shapiro purchased 4,359 shares at prices in the range of $11.41-to-$11.43, boosting his stake to 10,562 shares. Robert J. Greczyn, Jr., another Member on Healthways Inc. (NASDAQ:HWAY)’s Board of Directors, bought exactly 11,000 shares through two transactions at prices of $11.30 and $11.48 per share, and currently has in possession 17,203 shares. Lastly, Director Mary Jane England acquired 4,401 shares at a weighted average cost of $11.38, lifting her stake to 34,509 shares. The well-being company, which has seen its stock decline by nearly 40% since the beginning of the year, recently announced a structural reorganization and cost rationalization plan in an attempt to inject new dynamism into the company and cement its future growth. Conan Laughlin’s North Tide Capital held its position in Healthways Inc. (NASDAQ:HWAY) unchanged during the second quarter at 3.85 million shares.

Finally, Bank of Commerce Holdings (NASDAQ:BOCH) has seen three different insiders acquire stock thus far during the current trading week. Chief Credit Officer and Executive Vice President Robert H. Muttera purchased a 10,000-share block at a weighted average price of $6.44, enlarging his holding to 66,577 shares. Chairman Lyle L. Tullis acquired 5,000 units of common stock for $6.45 each. After the recent acquisition, the Chairman owns 245,095 shares, along with an additional 9,000 shares held indirectly. Director Joseph Q. Gibson also purchased 1,300 shares on Monday at a price of $6.30 per share, lifting his stake to 79,988 shares. The asset bank holding company and parent company of Redding Bank of Commerce has seen its shares advance by more than 8% since the beginning of the year. Even so, Bank of Commerce Holdings (NASDAQ:BOCH)’s stock is trading quite cheaply at the moment if bearing in mind its trailing P/E ratio of 10.63, which compares to a P/E ratio of 22.65 for the S&P 500. Israel Englander’s Millennium Management added a 22,441-share position in Bank of Commerce Holdings (NASDAQ:BOCH) to its portfolio during the second quarter.

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