Insiders Are Unloading Shares at These 3 Companies

It is commonly known that corporate insiders sell their companies’ stock for a wide array of reasons, most of which are not related to their companies’ current developments or future performance. Even so, heavy insider selling is an anxiety-provoking thought for most shareholders, so most investors would generally prefer to see insiders purchase stock rather than sell. Most companies compensate employees with stock options or shares, so they may be selling shares simply to raise capital to cover their daily expenses. Nevertheless, some insider selling activity may also be triggered by insider knowledge (although insiders are not allowed to trade on material non-public information), so tracking this type of activity should play a key role in one’s stock selection and analysis process. That being said, this article will lay out the insider sales witnessed at three companies and will also discuss the recent performance of the companies in question.

Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does besides providing high-quality articles. We also track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10.0 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. the S&P 500’s 48.7% gain) over the last 38 months (see the details here).

Cambrex Corporation (NYSE:CBM) is one of the three companies that has witnessed heavy insider selling this week. Director Ilan Kaufthal cashed out 52,315 shares on Monday at prices between $52.80 and $55.18 per share, trimming his holdings to 60,000 shares. The shares of the life sciences company are currently trading at an all-time high of nearly $53 per share, after advancing by a whopping 145% year-to-date. At the beginning of November, Cambrex Corporation (NYSE:CBM) reported gross sales of $92.35 million for the third quarter, which were up by 13.8% relative to the same period of last year, despite foreign exchange rates unfavorably impacting the company’s top-line by 5.6%. Its adjusted diluted earnings per share came to $0.40 per share, compared to $0.28 reported a year ago. The company also raised its EPS guidance for fiscal year 2015 to a range of $2.11-to-$2.19, which denotes an increase of 59%-to-65% relative to the EPS figure reported in 2014. However, the stock is trading at a relatively high trailing price-to-earnings ratio of 25.22 (the average for the S&P 500 benchmark stands at 23.18), which could somewhat justify the Director’s recent sell-off. 25 hedge funds tracked by Insider Monkey had positions in the company at the end of the third quarter, with Renaissance Technologies being among the largest equity holders of Cambrex Corporation (NYSE:CBM) among them, with 348,100 shares.

Let’s move on to the next page of the article, where we reveal the insider sales registered at TD Ameritrade Holding Corp. (NYSE:AMTD) and Dycom Industries Inc. (NYSE:DY).

TD Ameritrade Holding Corp. (NYSE:AMTD) had one of its top executives sell a sizable block of shares last week. Chief Operating Officer and Executive Vice President Marvin W. Adams sold 69,468 shares on Friday at a weighted average price of $36.66, cutting his total stake to 246,102 shares. The shares of the nation’s leading retail brokerage by trade executions are 3% in the green this year, and have fully recovered from the pullback endured throughout August and September. High market volatility generally results in increased client trading volume; however, a prolonged downturn in the U.S economy and the U.S stock markets in particular could lead to reduced trading volume and lower revenues for TD Ameritrade. The company’s long-term growth strategy involves enhancing its market share of total assets in client accounts, but the fast-increasing competition in the electronic brokerage market could hinder the company’s efforts towards that goal. Meanwhile, TD Ameritrade’s stock is trading at a trailing P/E ratio of 24.78, which does not suggest much upside in the upcoming months. Ken Griffin’s Citadel Investment Group is among the largest shareholders of TD Ameritrade Holding Corp. (NYSE:AMTD) within our database, holding 2.28 million shares as of September 30.

Last but not least, we will investigate a sizable insider sale registered at Dycom Industries Inc. (NYSE:DY) earlier this week. Director Thomas G. Baxter offloaded 15,000 shares on Monday at prices ranging between $87.31-to-$87.74 per share. After the recent transaction, the Director holds 19,562 shares. The provider of engineering, construction and installation services to the telecom industry has seen its market capitalization more than double since the beginning of the year, as its shares have advanced by 153%. The company has registered massive earnings growth over the past several quarters, partially driven by mergers and acquisitions activities. In fact, Dycom’s earnings growth ranged between 102% and 152% over the past three quarters, which seems to justify the company’s high valuation at the moment. At the end of November, FBR Capital reiterated its ‘Outperform’ rating on the stock and lifted its price target to $100 from $88, after the company delivered better-than-expected financial figures for the third quarter. Dycom’s third-quarter revenues added up to $659.3 million, compared to $510.4 million reported for the same quarter of last year. Its earnings per share grew by 124% year-over-year to $0.76. In the meantime, 25 smart money investors in our database were invested in the company on September 30 and owned slightly more than 24% of Dycom’s outstanding shares at that time. James Dinan’s York Capital Management held a 2.59 million-share position in Dycom Industries Inc. (NYSE:DY) on that same date.

Disclosure: None