Insider Selling at Exxon Mobil, Insider Buying at Legg Mason, Plus Notable Insider Activity at 3 Other Companies

The top-tier executives of all publicly-traded companies have access to information an analyst or investor could only dream of, which partially explains why corporate insiders’ purchases tend to outperform stock market benchmarks by a wide margin. Nejat Seyhun, a widely-known researcher in the field of insider trading and professor at the University of Michigan, found that executives’ purchases of their own companies’ stock tend to outperform the market by nearly 9% over the subsequent 12 months. Similarly, the researcher found that when executives sold shares, their companies’ stock underperformed the broader market by 5.4%. While Mr. Seyhun’s work is somewhat outdated now, there have been recent studies that presented similar conclusions. Having this in mind, the following article will discuss several noteworthy insider transactions registered at five companies in the past several trading sessions. Precisely, we will have a look at three companies that recorded notable insider selling, as well as two companies with mild insider buying.

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).

Katherine Welles / Shutterstock.com

Board Member Buys Shares of Promising Biopharmaceutical Company

Axel Bolte, a Board member of Ophthotech Corp (NASDAQ:OPHT), purchased 3,500 shares on Friday at a price of $56.97 per share. After the recent purchase, Mr. Bolte currently holds ownership of 6,000 shares.

The biopharmaceutical company focused on developing novel therapeutics for the treatment of diseases of the back of the eye, particularly for age-related macular degeneration (AMD), has seen its shares gain 29% in the past three months, though the stock is still 27% in the red year-to-date. Ophthotech Corp (NASDAQ:OPHT)’s most advanced candidate, Fovista, is being studied in Phase 3 clinical trials for use alongside anti-VEGF drugs used for the treatment of wet AMD. Assuming the company’s trials yield positive results, Fovista could turn into an add-on therapy that would benefit from the fast-increasing sales of existing drugs for the treatment of vision loss caused by AMD. Steve Cohen’s Point72 Asset Management acquired a new stake of 414,400 shares of Ophthotech Corp (NASDAQ:OPHT) during the March quarter.

Long-Time Legg Mason Director Initiates Stake 

Carol A. “John” Davidson, a Board member of Legg Mason Inc. (NYSE:LM) since early-May 2014, acquired a new stake of 3,000 shares on Monday for $33.92 each. While this insider activity doesn’t represent a cluster of insider buying, which is the kind of insider buying investors should look for, Mr. Davidson’s purchase does represent an important piece of information. The Director could have initiated a stake at any time over the past two years, but did not do so until now.

The shares of the global asset management firm are down by 11% in 2016 and by 35% over the past 12 months, which partly explains the aforementioned insider trading activity. As active investment management is slowly dying, Legg Mason Inc. (NYSE:LM) has been trying to expand the reach of its operations into the exchange-traded fund marketplace. In late January, the company acquired a minority equity position in Precidian Investments LLC, a firm with strong expertise on the ETF marketplace, with the sole purpose of partnering with Precidian to create new products and offerings. Nelson Peltz’s Trian Partners holds an 11.04 million-share position in Legg Mason Inc. (NYSE:LM) as of March 31.

The next page of this article will discuss notable insider transactions registered at three other companies.

Founder of Innovative Auto Mirror Supplier Sells Chunk of Shares

Gentex Corporation (NASDAQ:GNTX) has seen its most informed and influential executive sell shares over the past several trading sessions. Fred T. Bauer, the Founder, Chairman and Chief Executive Officer of Gentex, discarded 28,100 shares on Friday for $16.40 each and 238,200 shares on Monday at $16.42 each. After the recent transactions, Mr. Bauer holds an ownership stake of 6.35 million shares.

The auto mirror supplier has seen its market value gain 3% since the beginning of the year and could go even higher, thanks to the company’s freshly-introduced rear-view system called Full Display Mirror. Gentex Corporation (NASDAQ:GNTX) commenced the production of this intelligent rear vision system, which uses an externally-mounted video camera and mirror-integrated video display to optimize a vehicle’s rearward view, during the final quarter of 2015. I would pay a great deal of money to have this intelligent rear-view system in my car, so automakers will mostly likely seek to install this high-tech mirror in their vehicles. Royce & Associates, founded by Chuck Royce, reported ownership of 7.24 million shares of Gentex Corporation (NASDAQ:GNTX) in its latest 13F filing.

This Cloud-Based Provider of HCM Software Witnesses Increased Insider Selling

Paylocity Holding Corp (NASDAQ:PCTY) has seen two executives sell shares in the past few trading sessions, but the sales executed by one of them were conducted under a pre-arranged trading plan. In the other case, Michael R. Haske, Senior Vice President of Sales and Marketing, sold 36,900 shares on Monday and 23,100 shares on Tuesday at prices of between $38.00 and $40.03 per share, cutting his overall holding to 1.44 million shares.

The shares of the cloud-based provider of payroll and human capital management software solutions for medium-sized organizations have risen by 89% in the past two years and 14% in 2016. Paylocity Holding Corp (NASDAQ:PCTY)’s total revenue for the nine months that ended March 31 was $170.86 million, up from $112.69 million posted for the same period of the previous year. The increase was mainly driven by incremental revenue from new and existing clients, which included revenue from the company’s Affordable Care Act compliance solution. Matthew A. Weatherbie’s Weatherbie Capital was the owner of 1.14 million shares of Paylocity Holding Corp (NASDAQ:PCTY) at the end of March.

Energy Giant VP Sells Shares

Neil A. Chapman, Vice President of Exxon Mobil Corporation (NYSE:XOM) and President of ExxonMobil Chemical Company, offloaded 12,000 shares on Monday at $89.00 apiece. Mr. Chapman currently owns 230,299 shares of Exxon Mobil following the recent sale.

The world’s largest energy company is one of the best performing companies in the Dow Jones Industrial Average Index this year, as Exxon Mobil shares have gained 16% year-to-date. Exxon Mobil Corporation (NYSE:XOM) cuts its planned 2016 investments by one-fourth to $23 billion in response to depressed crude oil prices, but the oil and gas giant did maintain its dividend. In fact, the company’s Board of Directors increased its quarterly cash dividend to $0.75 per share from $0.73 in late April, with the upped dividend offering an annual yield of 3.31%. Thus, investors’ fears over a possible dividend cut were soothed, which gave a boost to Exxon’s stock performance. Ken Fisher’s Fisher Asset Management owns 4.54 million shares of Exxon Mobil Corporation (NYSE:XOM) as of the end of the first quarter.

Disclosure: None