Insiders Cut Exposure to These Companies Amid Growing Global Economic Concerns

The majority of global equities markets incurred losses on Wednesday, mainly owing to the higher-than-expected drop in China’s manufacturing activity. The growing concerns about the weakening global economy might have guided some investors to pull out their money from stocks and invest in safer asset classes. Some corporate insiders have been cashing out their holdings as well, which might indicate weakening future prospects at their companies. In the following article we will examine and discuss the insider selling activity at Cracker Barrel Old Country Store Inc. (NASDAQ:CBRL), Ambarella Inc (NASDAQ:AMBA), and BorgWarner Inc. (NYSE:BWA). It would be silly to affirm that the insider transactions at these companies should be taken as a bearish sign for granted, as insider selling might not always be related to companies’ prospects. Nevertheless, such activity amid broader market turmoil might raise red flags, so let’s look whether those companies face material challenges.

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We will start off by inspecting the insider selling activity at Cracker Barrel Old Country Store Inc. (NASDAQ:CBRL), which just a few days ago reported its financial results for the fourth quarter and full year that ended July 31, 2015. Christopher A. Ciavarra, Senior Vice President, Marketing, reported selling 5,000 shares on Monday at prices ranging from $146.41 to $148.41, trimming his holding to 10,274 shares. It is worth noting that the executive received 4,477 shares as performance-based stock awards, with 1,480 of these shares being deducted to satisfy federal tax withholding obligations. The company’s President and Chief Executive Officer, Sandy B. Cochran, also unloaded 40,000 shares on Friday at a weighted average price of $146.11, after receiving stock awards based on performance as well. Following the recent transactions, the executive currently owns 122,335 shares. Going back to company’s financial performance, Cracker Barrel Old Country Store reported revenue of $2.84 billion for the year, up 5.9% from the previous year. The company’s stock performance has been relatively strong, delivering a return of over 4% year-to-date. Israel Englander’s Millennium Management reported owning 188,985 shares of Cracker Barrel Old Country Store Inc. (NASDAQ:CBRL) in its latest 13F filing.

Let’s now move on to Ambarella Inc (NASDAQ:AMBA), which had five different insiders sell stock last week. Yun-Lung Chen, who has been Vice President of Business Development at Ambarella since 2011, sold off his entire stake of 5,739 shares on Thursday at prices in the range of $71.8 and $74.8 per share. He also disposed of 8,321 shares earlier last week at a price of $68.8 per unit. However, all these shares represented either restricted stock units or stock options, which appear to had been fully exercised or vested prior to their sale. Ambarella’s CFO, George Laplante, also sold 4,450 shares for $70.8 apiece last week, but these shares were sold to pay tax obligations from the vesting of restricted stock units. It seems that the insider selling activity of the aforementioned executives and of the other ones is not entirely related to the company’s future outlook and prospects, as most of them sold shares to cover tax obligations from the vesting of restriced stock. However, the company anticipates a reduction in its chip shipments mainly as a result of limited new wearable product launches. To be more detailed on that, a recent report released by Cleveland Research indicated a lower demand for the wearable sports cameras created by GoPro Inc (NASDAQ:GPRO), which has Ambarella as its main chip supplier (see more details here). The shares of the developer of low-power, HD video compression and image processing semiconductors have advanced more than 31% since the beginning of the year despite being affected by the broader market selloff. Ken Griffin’s Citadel Investment Group added a 142,335 share-stake in Ambarella Inc (NASDAQ:AMBA) during the second quarter.

Last but not least, we will look into the insider activity at BorgWarner Inc. (NYSE:BWA). Alexis P. Michas, the non-executive chairman of BorgWarner’s Board of Directors, offloaded 10,000 shares at $43.31 apiece. After the last week’s transaction, the director’s holding comprises 109,640 shares. It appears that the director made the right call by reducing his stake, as the shares of BorgWarner lost 7.60% during the trading session on Tuesday. This drop might come after Remy International Inc. (NASDAQ:REMY)’s stockholders approved the previously-announced agreement and plan of merger related to BorgWarner’s acquisition of the company. Earlier this year, BorgWarner agreed to acquire Remy for $951 million in cash, which brought together two auto parts makers that had been working on making products aimed at enhancing the efficiency of vehicles. Even so, the acquisition is not completed yet as it remains subject to the waiver of customary closing conditions. It appears that this acquisition have sent the shares of BorgWarner plummeting, which have lost 28% since the beginning of the year. Mario Gabelli’s GAMCO Investors is one of the largest shareholders of BorgWarner Inc. (NYSE:BWA) within our database, owning 894,600 shares.

Disclosure: None