Insider activity in stocks is quite common and tracking this can provide us with some valuable insight into the company’s performance in near future. Among all the insider activity on Tuesday, we noticed three particular companies which had shares purchased by certain key insiders. The companies under discussion are McGraw Hill Financial Inc (NYSE:MHFI), JMP Group Inc. (NYSE:JMP) and 8×8, Inc. (NASDAQ:EGHT). Insider moves, especially insider purchases are really important to track because research in the past has shown a strong correlation between insider purchases and short-term stock returns. In order to better gauge stocks’ potential, we also track the hedge fund activity in them, and will look at that activity in this article as well.
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We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 123% since then and outperformed the S&P 500 Index by around 66 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Starting with McGraw Hill Financial Inc (NYSE:MHFI), Chief Financial Officer and Executive Vice President, John F. Callahan Jr. purchased 2,000 shares of the company yesterday. Callahan purchased the shares at a price of $97.79 per share, for a total value of $195,580. After this purchase Callahan holds 44,607 shares of the company. This purchase by one of the top executives of the company shows his confidence in the stock, and the timing of this purchase could not be any better, soon after more than a 5% drop on Monday following strong second quarter earnings and the announcement that the company has agreed to a deal worth $2.23 billion to acquire the New York-based financial data service provider SNL Financial LC. Year-to-date the stock has gained around 12%, with the majority of the gains coming in February. The stock has rebounded today, having gained around 2% so far. By the end of March, there were 55 hedge funds with a total investment of $3.54 billion in the stock, which was up from $3.43 billion in shares held by 51 hedge funds at the end of 2014. Considering the stock appreciation of 16% during the January – March period, we can say that the hedge funds opted to pull some money out of this stock, despite the fact that the number of hedge funds holding long positions increased during the period. Jonathan Jacobson‘s Highfields Capital Management held the largest position in the stock at the end of March, with around 7.5 million shares valued at $778.9 million, comprising 6.94% of the hedge fund’s total 13F portfolio.
Moving on to JMP Group Inc. (NYSE:JMP), an independent Director, Jonathan M. Orszag purchased 20,000 shares at a price of $7.42 per share, for a total value of $148,480. Orszag now owns 78,812 shares of the company following this purchase. The stock has gained more than 4% so far today, due to the announcement that shareholders as of the market close on Tuesday will be eligible for a dividend of $0.07 per share. The investment banking company reported its financial results for the second quarter on Friday. The company reported net income of $0.22 per share, beating the Street’s consensus estimate of under $0.20 EPS. The company also reported a 22% increase in net income year-over-year. “In the second quarter, JMP Group continued its strong performance, with operating EPS increasing 22% year over year to $0.22,” CEO and Chairman of JMP Group, Joe Jolson was quoted as saying in a company statement. Year-to-date the stock has lost 2.5% of its value and since its high in March, has lost close to 13%. There were four hedge funds with a total investment of $6.1 million in the stock at the end of March, compared to a total investment of $5.7 million by six hedge funds at the end of 2014. Given the stock appreciation of 10% during the January – March period, we can say that hedge funds were slightly bearish on the stock. Among the hedge funds tracked by Insider Monkey, Chuck Royce‘s Royce and Associates held the largest position in the stock at the end of March, with around 585,000 shares worth close to $4.9 million.
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Finally, looking at 8×8, Inc. (NASDAQ:EGHT), Chief Executive Officer and a Director of the company, Vikram Verma purchased 12,300 shares on July 28 for a price of $8.09 per share, for a total of $99,507. There was also a key insider sale of this stock on July 27, as Chief Technology Officer Bryan Martin sold 2,800 shares for a price of $8.40 per share. Verma and Martin are left with 195,534 shares and 1,165,110 shares respectively after their latest transactions. There have been no other insider purchases or sales of shares in 2015. The stock has lost 10% so far this year, and since its 52-week high on June 25, has lost around 14% of its value. The company reported its fiscal 2016 first quarter results on July 22, posting a total revenue increase of 23% year-over-year to $46.7 million. 8×8, Inc. (NASDAQ:EGHT) also reported a net loss of $0.01 for the quarter, as opposed to flat earnings during the same period in 2014. “I am pleased to report the completion of a very successful first quarter start to 8×8’s fiscal 2016,” CEO Verma was quoted as saying in a company statement. By the end of March there were 11 hedge funds with a total investment of $40.3 million in 8×8, as opposed to an investment of $50.4 million by eight hedge funds at the end of 2014. Considering a drop in share value of 7.5% during the first quarter, we can say that hedge funds opted to pull a lot of money out of this stock. Among the hedge funds tracked by Insider Monkey, Archon Capital Management led by Constantinos J. Christofills held the largest position in the stock, with around 2.7 million shares valued at $22.8 million by the end of the first trimester.
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