After the biggest insider buying day of 2018 so far on Friday, May 18 (114 purchases), insider buying activity slowed considerably last week, being outpaced nearly 3-1 by insider sales. Likewise, the dollar volume of the top insider purchases was quite low during the week.
Insider buying, particularly clusters of buying activity, are a powerful signal that a stock looks undervalued in the eyes of those who know the company and its prospects in the greatest detail. It’s unsurprising then that emulating such activity has been shown to deliver outsized returns. Below we’ll check out the insider buying activity at three companies last week, two of which have had noticeable clusters of buying.
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Extreme Networks, Inc (NASDAQ:EXTR)
Who Bought Shares: Director Raj Khanna
How Many Shares Were Bought: 10,000 @ $8.96 per share
Date of the Transaction(s): May 24
The Extreme Networks, Inc (NASDAQ:EXTR) board member was just the latest insider of the company to have purchased shares over the past two weeks. A filing revealed that Director John Shoemaker purchased 20,000 shares on May 11, while Directors Edward Kennedy and Kathleen Holmgren, as well as President and CEO Edward Meyercord, have all purchased shares since then.
The insider buying flurry followed Extreme Networks, Inc (NASDAQ:EXTR) shares cratering on May 9 following the release of disappointing fiscal third-quarter results. While revenue jumped by 76% year-over-year, it was due to several acquisitions in 2017 that were being banked on for even more growth. Extreme Networks, Inc (NASDAQ:EXTR) cited the difficulty of integrating those acquisitions into a single back-end platform as contributing to the underwhelming results, as it hindered business activity in the quarter. With that work now down, the company expects better results going forward.
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On the next page we’ll look at two other stocks with heavy insider buying activity in recent days.
Camping World Holdings Inc (NYSE:CWH)
No less than four different insiders of Camping World Holdings Inc (NYSE:CWH) have purchased shares of the company over the past two weeks, including CEO Marcus Lemonis, who purchased 41,000 shares in multiple transactions between May 14 and May 17. Directors Mary George (2,500 shares), Andris Baltins (10,000 shares) and Kent Schickli (25,000 shares) have also loaded up on shares since then.
The insider buying surge comes after a dreadful start to the year for Camping World Holdings Inc (NYSE:CWH) shares, which have lost 55% of their value. Their steady march downwards in 2018 intensified on May 9 when results from Camping World’s first-quarter, which Lemonis characterized as “very strong”, were met with overwhelming negativity by the market. Investors appear to have been spooked off by slowing sales (20.4% year-over-year revenue increase in Q1, down from a 35% increase in the previous quarter), as well as the revelation that a cold spring had impacted sales during the start of the company’s peak selling season. Nonetheless, Camping World reiterated its revenue guidance for the year.
More recently, Camping World shares were dinged after the company changed its registered public accounting firm (out: Ernst & Young, in: Deloitte & Touche), citing “material weaknesses in its internal control over financial reporting” during its fiscal 2017 year.
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NiSource Inc. (NYSE:NI)
Who Bought Shares: Pablo Vegas, EVP of Gas Business Segment & Chief Customer Officer
How Many Shares Were Bought: 14,500 @ $25.02 per share
Date of the Transaction(s): May 25
Pablo Vegas, who joined NiSource Inc. (NYSE:NI) in 2016 as Executive Vice President and President, Columbia Gas Group before being promoted to his current roles a year later, made his second insider purchase since joining the company, with the first coming back in November of 2016. The purchase also comes a little over two weeks after Director Eric Butler purchased 4,000 shares of NiSource Inc. (NYSE:NI).
Shares of the natural gas utility company, which serves over 3 million customers in seven U.S states, have declined slightly in 2018. The utilities sector, which tends to perform poorly when interest rates rise, has surprisingly been one of the strongest sectors since mid-April. NiSource Inc. (NYSE:NI) was added to Goldman Sachs’ Conviction Buy List earlier this month, with the investment bank saying that the stock deserves a premium valuation as a pure-play utility and that it should deliver above-average earnings and dividend growth relative to other names in the sector.
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Disclosure: None
