Heavy Insider Selling Detected at These 3 Companies: Cause For Concern?

Although it is common for insiders to cash out portions of their stakes to gather the harvest of their hard work, this type of activity may raise red flags on some occasions. To be more detailed on that, corporate insiders can sell shares for a variety of reasons that are not related to their companies’ prospects, valuations and/or other firm-specific issues; hence, interpreting insider selling activity has become an impossible task. Even so, if I were investing my hard-earned cash in a company’s stock for a medium- or long-term period, I would have been disturbed by heavy insider selling activity at that company. At the end of the day, insider trading activity offers some insights on how insiders feel about their companies’ shares. The Insider Monkey team identified three companies that had a large volume of insider selling activity last week, so this article will lay out the insider sales registered at those companies and discuss their recent performance.

Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does besides providing high-quality articles. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

Let’s start out by investigating the insider selling activity registered at J2 Global Inc. (NASDAQ:JCOM). Richard S. Ressler, Chairman of J2 Global’s Board of Directors since 1997, cashed out 157,365 shares last week at prices in the range of $80.00-to-$81.87 per share, trimming his overall holding to 1.47 million shares. J2 Global, a provider of Internet services has experienced significant growth this year through a mix of acquisitions and organic growth. The stock is up 30% for the year and is currently trading at a rich trailing price-to-earnings ratio of 30.30, which compares with the average of 22.71 for the S&P Index. Nevertheless, this ratio may not be entirely indicative at the moment, considering J2 Global Inc. (NASDAQ:JCOM)’s earnings potential, which has been propelled by numerous acquisitions aimed at increasing the company’s customer base through increased presence in new and existing markets. The company reported revenues of $178.70 million for the third quarter, which were up from $153.02 million reported last year. Furthermore, J2 Global anticipates that its Business Cloud Services business is set to grow in the upcoming future, even without pursuing new acquisitions, as a result of increased focus on enhancing the existing offerings. A total of 14 hedge funds from our extensive database were invested in the company at the end of the September quarter. Amy Minella’s Cardinal Capital cut its exposure to J2 Global Inc. (NASDAQ:JCOM) by 6% during the July-September period, ending the quarter with roughly 518,000 shares.

The second page of this daily insider trading article reveals the insider sales registered at FLIR Systems Inc. (NASDAQ:FLIR) and Parkway Properties Inc. (NYSE:PKY).

FLIR Systems Inc. (NASDAQ:FLIR) is another company that witnessed a massive insider sale last week. Director Earl R. Lewis sold 50,000 shares on Thursday at a price of $30.13 per share and currently holds 693,078 shares, which include dividends on vested restricted stock units. His spouse also holds an ownership stake of 186,832 shares. There are several aspects that point to the fact that the Director might have cashed out the aforementioned block of shares too early. First, the innovator and supplier of thermal imaging technology has a trailing P/E ratio of 17.69, which is noticeably below the average for the S&P 500. Second, FLIR Systems recently has acquired video surveillance developer DVTEL Inc. in an all-cash deal valued at $92 million, which will complement the company’s current solutions and offering with new security and hardware. Third, the company completed a realignment plan that involved closing six sites and transferring those operations to larger facilities, and also consolidated its optics and laser manufacturing businesses in recent years. Hence, FLIR Systems seems to be well-positioned to generate both top- and bottom-line growth in the upcoming quarters. Meanwhile, the company received more attention from the hedge funds tracked by Insider Monkey during the third quarter, as the number of smart money investors with positions in the company climbed to 26 from 20 quarter-over-quarter. Royce & Associates, founded by Chuck Royce, holds a stake of 1.72 million shares in FLIR Systems Inc. (NASDAQ:FLIR) as of September 30.

Last but not least, Parkway Properties Inc. (NYSE:PKY) had two top executives sell stock last week. To begin with, Executive Vice President and Chief Financial Officer David R. O’Reilly unloaded 80,000 shares on Wednesday at a weighted average sale price of $16.79. After the recent sizable sell-off, the CFO currently owns 103,559 shares. Moreover, Executive Vice President and Chief Operating Officer M. Jayson Lipsey sold 16,500 shares on the same day at prices between $16.69 and $16.75 per share, cutting his stake to 89,368 shares. The self-managed real estate investment trust that focuses on the acquisition and management of office and parking properties has seen its stock lose 10% so far in 2015, so it is not entirely clear what might have propelled these executives to cash out. The company holds a portfolio of 38 office and parking properties located in six states as of October 1. The REIT’s top-line figure is highly correlated with the overall occupancy rate of its office buildings, which declined in the third quarter relative to the same period last year. The occupancy of Parkway’s office portfolio on October 1 totaled 90.0%, compared with 90.4% reported on July 1 and 89.1% on October 1, 2014. A mere seven smart money investors from our database had positions in the REIT at the end of the third quarter. Israel Englander’s Millennium Management significantly increased its exposure to Parkway Properties Inc. (NYSE:PKY) during the third quarter, holding 1.39 million shares as of September 30.

Disclosure: none