Increased Insider Selling at Data Center REIT and Four Other Companies with Noteworthy Insider Trading Activity

Although it’s impossible to estimate how many retail investors examine insider trading activity as part of their stock analysis process, there is good reason to believe numerous long-term-oriented investors do take notice of insider buying metrics. There are three primary reasons researchers study reported insider trading, which include science, profit, and policy. Without lying to ourselves, most of us mostly think about developing profitable trading strategies based on insiders’ actions, so let’s see what academics say about the profitability of insider trading. Past research concludes that corporate insiders buying shares on the open market have a good feel for short-term developments within their firms, so they do earn abnormal returns on aggregate. While most studies have not found abnormal returns when insiders sell shares, one should still have a look at spur-of-the-moment insider selling (insider selling conducted under pre-arranged trading plans or related to freshly-exercised stock options does not seem to be very informative). That said, let’s take a glimpse at several noteworthy insider purchases and sales reported with the SEC on Thursday.

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 imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).

This Refiner Saw Two Top-Tier Executives Purchase Shares This Week

PBF Energy Inc. (NYSE:PBF) had two of its most influential and informed executives buy shares earlier this week. To begin with, President Matthew C. Lucey purchased 10,000 Class A shares on Wednesday at a price tag of $27.50 per share, increasing his overall holding to 50,000 shares. More importantly, Chief Executive Officer Thomas J. Nimbley snapped up 50,000 shares on the same day at prices varying from $27.34 to $27.52 per share, which lifted his ownership to 110,000 shares.

The market value of the independent petroleum refiner has fallen by 25% since the beginning of 2016. PBF Energy Inc. (NYSE:PBF), which has four refineries across the United States, reported revenues of $2.80 billion for the first quarter of 2016, which were down from nearly $3.00 billion posted a year ago. Industry refining margins in the Mid-Continent were lower during the first three months of 2016 as compared to the same period of 2015, which put some pressure on the refiner’s performance. Seth Klarman’s Baupost Group LLC reported owning 10.64 million shares of PBF Energy Inc. (NYSE:PBF) in its latest 13F.

The next two pages of this insider trading article will examine several insider transactions registered at four other companies.

This Auction House Registers Cluster of Insider Buying

Sothebys (NYSE:BID) had a cluster of insider buying this week, which involved three different insiders. Olivier Reza, Board member at Sotheby’s, reported the purchase of 10,000 shares on Wednesday for $30.00 each, all of which are held by grantor trusts that collectively own 45,000 shares. Mr. Reza also holds a direct ownership stake of 10,000 shares. Harry J. Wilson, another Board member, bought 653 shares on Wednesday for $29.98 each and 4,347 shares on Thursday at $30.33 apiece, boosting his stake to 28,000 shares. Last but not least, Domenico De Sole, Chairman of Sotheby’s Board of Directors, acquired 6,620 shares on Thursday at prices that ranged from $30.20 to $30.39 per share. The Chairman lifted his overall holding to 33,105 shares.

The shares of the auction house have advanced by 19% since the start of 2016. The insider trading activity at Sothebys (NYSE:BID) may be particularly interesting for outsiders considering that trends in the art market may be difficult to predict, which surely cause major variability in the company’s financial results each quarter. Dan Loeb’s Third Point LLC had 6.66 million shares of Sothebys (NYSE:BID) among its pool of holdings at the end of the March quarter.

Pandora Media’s Board Member Buys Shares amid Activist Pressure

Timothy Leiweke, who has been serving on Pandora Media Inc. (NYSE:P)’s Board of Directors since April 2015, purchased 10,000 shares on Wednesday at prices that fell in the range of $11.57 to $11.68 per share. Mr. Leiweke currently owns 43,798 shares.

The insider purchase comes shortly after the Keith Meister’s Corvex Management LP revealed economic interest in 9.95% of the Internet-radio pioneer’s outstanding shares. The activist investment firm urged Pandora Media Inc. (NYSE:P) to engage an independent investment bank to conduct a value maximization process, which would examine a possible sale of the company. The activist hedge fund, run by a former protégé of Carl Icahn, said in a fresh letter to Pandora’s Board that the company “has been unable to date to translate its great product into a great business with an attractive public market valuation”, pointing out the company’s “questionable capital allocation decisions”, “poor investor communications”, “lack of senior management equity ownership” and other issues. Pandora Media shares are down 9% so far in 2016. In a freshly-submitted 13D with the SEC, Corvex Management LP disclosed ownership of 19.07 million shares of Pandora Media Inc. (NYSE:P), as well as additional economic exposure in the form of cash-settled swaps.

This Auto Supplier Saw Its CEO Offload Shares This Week

Tenneco Inc. (NYSE:TEN)’s Executive Chairman, Gregg M. Sherrill, sold 51,609 shares on Tuesday at a weighted average price of $53.69. After the recent sale, Mr. Sherrill currently holds an ownership stake of 334,975 shares, along with an additional 116,441 restricted stock units.

The manufacturer of clean air and ride performance products and systems for light vehicle, commercial truck and off-highway applications has seen its market value gain by 13% year-to-date. Tenneco Inc. (NYSE:TEN)’s revenues of the first quarter of the year were $2.14 billion, increasing from $2.02 billion reported a year ago. The increase was mainly attributable to stronger original equipment light vehicle volumes in North America, Europe, India and China; higher aftermarket sales in Europe, South America and North America; and higher commercial truck, off-highway and other Clean Air revenue. Joel Greenblatt’s Gotham Asset Management upped its position in Tenneco Inc. (NYSE:TEN) by 91% during the March quarter to nearly 403,000 shares.

This Data Center REIT Witnesses Increased Insider Selling After Reaching New 52-Week High

Equinix Inc. (NASDAQ:EQIX) has seen multiple insiders unload shares in the past several weeks, so let’s have a look at the most recent and noteworthy insider selling. Chief Financial Officer Keith D. Taylor discarded 5,500 shares on Wednesday at prices varying from $363.33 to $364.33 per share, cutting his ownership to 44,846 shares. Yau Tat Lee, President of Equinix Asia-Pacific, sold 1,607 shares on Thursday for $366.62 each, which reduced his holding to 2,457 shares.

The shares of the data center REIT recently reached a new 52-week high of $368.89, after advancing 20% since the beginning of the year. In mid-May, Equinix Inc. (NASDAQ:EQIX) agreed to divest eight data centers in its European business to the owner of technology-related real estate Digital Realty Trust Inc. (NYSE:DLR) for roughly $874 million. The divestiture was related to the REIT’s acquisition of Telecity Group plc. Stephen Mandel’s Lone Pine Capital owns 2.32 million shares of Equinix Inc. (NASDAQ:EQIX) as of the end of March.

Disclosure: None