At Insider Monkey, we track the moves of a select group of hedge funds to identify collective buying and selling patterns among the best money managers in the world, so we can profit from their expertise. We also use that data to power our small-cap strategy, which has returned over 123% since its inception in September 2012, thumping the S&P by more than 65 percentage points during that time (that’s nearly double the returns!) (see the details).
We don’t just track hedge funds though. As our name implies, we also track the latest moves by company insiders for a similar reason. Though the correlations aren’t as strong, we can still gain some valuable insight into stocks based on the activity of insiders in those companies, and this is especially true of insider purchases. While insiders could sell shares for various reasons, there’s only one real reason to buy shares: because they think the shares are undervalued and/or will appreciate in the future, whether because the market is simply undervaluing them, or because the company has big plans for future growth.
After sifting through the hundreds of Form 4 (insider trading) documents filed with the SEC on Monday, we came across three key stocks that had notable insider purchases by directors or officers of those companies. They are Plains All American Pipeline, L.P. (NYSE:PAA), Hilton Worldwide Holdings Inc (NYSE:HLT), and Kronos Worldwide, Inc. (NYSE:KRO), and we’ll take a look at those companies in this article.
Let’s start with Hilton Worldwide Holdings Inc (NYSE:HLT), undoubtedly the most well-known company of the bunch. 10,000 shares of the hotel chain, which operates 550 hotels and resorts in 80 countries around the world, were snapped up by Director Douglas Steenland at a price of $26.10 per share for a total cost of $261,000. The purchase is the first by the Director, who also serves as a Director on the board of several other companies, which includes Travelport Worldwide Ltd (NYSE:TVPT) and American International Group Inc (NYSE:AIG). Shares have declined by about 16% since hitting their all-time closing high of $31.10 on April 9 and are down by 0.65% year-to-date, rather disappointing when the lodging industry as a whole has had a relatively strong performance on the stock market so far this year, returning 9% according to Morningstar data, though several of Hilton Worldwide Holdings Inc (NYSE:HLT)’s major rivals like Marriott International Inc. (NASDAQ:MAR) and Wyndham Worldwide Corporation (NYSE:WYN) are down in 2015, with smaller industry players generating the gains. Donald Chiboucis’ Columbus Circle Investors holds a position of 4.18 million shares as of June 30, having increased it by nearly 850,000 shares during the second quarter.
Let’s move on to Kronos Worldwide, Inc. (NYSE:KRO), where Chairman Steven Watson has been on a buying spree, snapping up 24,500 shares of the company on August 10. In this case, we can see that emulating insider purchases in the hopes of immediate results does not always pay off, as Watson also purchased 10,000 shares on May 8 in a sign of confidence after a big dip on May 7; however, the stock has fallen by another 33% since then and is down by nearly 40% year-to-date. The latest share plunge came after the company reported a second quarter loss of $159.8 million, a loss of $1.38 per share or a loss of $0.08 per share when adjusted for pretax expenses, while analysts had predicted a profit of $0.23 per share. Just eight funds tracked by Insider Monkey had long positions in the stock as of March 31, and held just over half a percentage point of the company’s shares. Ken Griffin’s Citadel Investment was the largest investor in the company within our database at that time, owning 234,495 shares, but the firm sold off its position during the second quarter. Needless to say, there isn’t much optimism for Kronos Worldwide, Inc. (NYSE:KRO) at the moment, aside from the continuing brave face put on by Chairman Stevens.
Lastly is Plains All American Pipeline, L.P. (NYSE:PAA), the Chairman and CEO of which, Greg Johnson, purchased 20,000 shares of on Monday at a price tag of $36.46 each. Though coming at a none-too-cheap price tag of $729,200, the shares are only a paltry addition to Johnson’s holding, with the company’s head honcho now boasting over 1.26 million shares worth over $45.19 million. Nonetheless, those holdings were worth considerably more just a few months ago, as Plains All American Pipeline, L.P. (NYSE:PAA)’s stock has lost over 30% of its value since late April. Unsurprisingly, we see that all three of the purchases covered in this article were in stocks which had recent rough stretches, as is commonly the case with insider purchases. The latest rough stretch for Plains All American Pipeline came on August 5 following the release of its second quarter earnings after-hours the previous day. Among other things, it was revealed that the company is under investigation by the Department of Justice related to environmental safety and could potentially be subject to hefty fines. The company also warned that it may halt distributions growth for at least two years. Shares fell over 10%, which was bad news for Matthew Hulsizer’s Peak6 Capital Management, which held just under 68,000 shares of the company as of June 30.
Disclosure: None
