Slightly more than a decade ago, the U.S. Congress enacted the Sarbanes-Oxley Act of 2002 that mandated significant changes to reporting requirements. Pursuant to those changes, corporate insiders are required to report securities transactions with the SEC within two days following their trades, instead of 10 days stipulated under the old rules. This reporting requirement enables investors to use insider trading data in a more efficient manner.
Insider trading activity represents a valuable piece of information that can help almost all types of investors in their stock selection and analysis process. Most insider trading pundits assert that insider buying serves as a very good signal to follow, whereas insider selling activity tends to be much more complex to interpret accurately. The increased usage of equity-based compensation has distorted the insider trading data. Indeed, it is close to impossible to figure out the actual reason behind each insider sale out there in the market. Even so, most insiders tend to act as long term-oriented investors rather than short-term-focused traders by buying their company’s shares when they seem undervalued and selling when they look expensive. Thus, insider selling could still be interpreted as a sign that a company’s valuation approaches its “fair” market value. With that in mind, let’s discuss several noteworthy insider sales reported with the SEC on Monday.
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).
CEO of Battered Advanced Materials Company Buys Shares After Stock Price Plunge
The man at the helm of Park Electrochemical Corp. (NYSE:PKE) boosted his equity holding this past week. The company’s Board Chairman and Chief Executive Officer, Brian E. Shore, snapped up 7,500 shares on Friday at a price tag of $14.71 each. Following the recent purchase, Mr. Shore currently owns an aggregate of 425,305 shares.
This insider purchase comes several weeks after the global advanced materials company released disappointing results for the second quarter of fiscal 2017, ended August 28. Park Electrochemical Corp. (NYSE:PKE)’s net sales worldwide for the previous quarter were $29.06 million, a disturbing 23% lower than in the same period of the previous year. The decrease in the company’s top line was mainly driven by lower sales of printed circuit materials products in Asia and North America, as well as lower sales of aerospace composite materials, structures and assemblies. Even so, the company’s shares are 2% in the green so far this year despite a 9%-drop in the past month. Royce & Associates, founded by Chuck Royce, was the equity holder of 2.75 million shares of Park Electrochemical Corp. (NYSE:PKE) at the end of the second quarter.
Follow Park Aerospace Corp (NYSE:PKE)
Follow Park Aerospace Corp (NYSE:PKE)
On the next two pages of this article, we will present fresh insider trading activity recently observed at four other companies.
