High Profile Insiders Selling Shares Of These 3 Companies

The Dow Jones Industrial Average closed 23.65 points in the red on Monday, as most market participants await the Federal Reserve’s two-day policy meeting that kicks off today. This meeting might spur more volatility in the U.S stock markets, but the ongoing third quarter earnings season still remains the main driver of these markets at the moment. Reportedly, approximately 170 companies included in the Standard and Poor’s 500 Index are set to post their earnings results this week. At times when it is hard to foresee where the market is heading, one should look into the recent insider trading activity as a guide. In fact, monitoring insider trading activity should always be a part of an investor’s stock selection process, as it might provide useful insights about the future prospects of different companies. Moving on to the primary purpose of this article, statistics reveal that the insider selling activity increased quite significantly during the previous week relative to the one prior to that. It is quite complicated to accurately interpret insider selling, as insiders may unload their holdings for numerous reasons that are not related to their companies’ prospects. Therefore, one should closely examine each insider sale, which is exactly what we’ll do in this article concerning the insider trading activity at three companies.

Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does, besides providing high-quality, evidence-based 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 begin our discussion by looking at the insider selling activity at Dr Pepper Snapple Group Inc. (NYSE:DPS), which saw five different insiders sell stock last week, only the most notable trades of which will be discussed. President and Chief Executive Officer Larry D. Young sold 50,000 shares on Friday at a weighted average sale price of $89.94, reducing his stake to 150,000 shares. Moreover, David Thomas, Executive Vice President of Research and Development, also offloaded 3,500 shares on the same day at $90.19 apiece and currently holds 40,265 shares. Finally, Senior Vice President and Controller Angela A. Stephens sold 1,029 shares at prices ranging from $90.53-to-$90.55. Following the transactions, the executive owns a stake of 4,913 shares. The shares of the beverage company are currently trading near their all-time high of almost $90, so these insiders might have decided to cash out a portion of their stakes for maximum benefit. Dr Pepper Snapple Group Inc. (NYSE:DPS)’s stock is trading at a forward price-to-earnings ratio of 20.97, which might also explain insiders’ bearish moves (the forward P/E ratio for the S&P 500 equals 18.41). Dr Pepper Snapple Group Inc. (NYSE:DPS) was the largest equity holding of Navellier & Associates, founded by Louis G. Navellier in 1980, at the end of the third quarter (read more details).

The next page of the article discusses the insider selling activity at two other companies.

Royal Caribbean Cruises Ltd (NYSE:RCL) is another company that has seen strong insider selling activity lately. President and Chief Operating Officer Adam M. Goldstein sold a 90,000-share block on Monday at a weighted average price of $98.88. The COO currently holds a direct ownership stake of 253,153 shares. The shares of the cruise company are also trading at an all-time high. However, Royal Caribbean Cruises Ltd (NYSE:RCL)’s might be heading even higher, given that the company announced its plans to repurchase $200 million worth of stock under an accelerated stock repurchase (ASR) plan. This might indirectly hint that the company’s management believes that the stock is still undervalued at the moment. Put differently, there is no reason for the company to repurchase shares via an ASR transaction if it does not anticipate stock price appreciation in the months ahead. Ken Griffin’s Citadel Investment Group was bullish on Royal Caribbean Cruises Ltd (NYSE:RCL) during the second quarter, holding a stake of 1.46 million shares as of June 30.

Last but not least, we will examine the insider selling activity at equity real estate investment trust Prologis Inc. (NYSE:PLD). Gary E. Anderson, Chief Executive Officer of Europe and Asia at Prologis since June 2011, unloaded 11,500 shares on Friday at a price of exactly $43 per share, trimming his stake to 33,043 shares. The shares of Prologis Inc. (NYSE:PLD) have been on a steep uptrend since the beginning of September, advancing by more than 17% since then. The company’s strong third quarter earnings report has also played a minor role in the strong stock performance of Prologis. The REIT reported net earnings per diluted share of $0.49, compared to $0.23 registered in the same quarter a year ago. Therefore, it might simply be the case that the executive decided to take some profits off the table as a result of the recent uptrend. D.E. Shaw & Co. L.P., founded by David E. Shaw, reported owning 1.53 million shares of Prologis Inc. (NYSE:PLD) through its 13F for the second quarter.

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