Insider are privy to a lot of information about their companies than individual investors and even institutional investors. When insider sell shares, other investors usually see it as a bearish sign, however, that’s not always the case. There can be various reasons because of which an insider might sell his or her shares like for profit booking purposes or for funding an expense. Nevertheless, it’s always beneficial for an investor to keep track of what insiders in a company are doing with their stakes. In this article we will be focusing on two companies in which insiders have sold their shares recently: Standex Int’l Corp. (NYSE:SXI), and Mead Johnson Nutrition CO (NYSE:MJN).
Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. 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 the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 118% over the ensuing 36 months, outperforming the S&P 500 Index by nearly 60 percentage points (read more details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
Let’s start with Standex Int’l Corp. (NYSE:SXI), a New Hampshire-based manufacturer of services and products for different types of industrial and commercial market segments. Thomas D. DeByle, the Vice President, Treasurer, and Chief Financial Officer of the company since 2008, reported selling 212 and 3,400 shares of the company on August 31 and September 1 respectively, at an average price of $81.02 per share. Following these transactions, Mr. DeByle owns 40,037 shares of Standex Int’l Corp. (NYSE:SXI). After witnessing a gradual uptrend after the financial crisis, the company’s stock has remained relatively range-bound since May 2014 and are currently trading down by 2.4% year-to-date. Standex Int’l Corp. (NYSE:SXI)’s stock jumped by nearly 10% on August 25 on the back of better-than-expected earnings of $1.31 per share, compared to estimates of $1.26. Following the financial results, Wunderlich Securities reiterated its ‘Buy’ rating on the stock and raised the price target to $98 from $92. Among the funds we track Cliff Asness’s AQR Capital Management and Mario Gabelli‘s GAMCO Investors were the top two shareholders of Standex Int’l Corp. (NYSE:SXI) at end of June, owning 95,237 shares and 74,400 shares respectively.
Moving on to Mead Johnson Nutrition CO (NYSE:MJN), where Kimberly A. Casiano, a Director on the company’s board, unloaded 1,138 shares of Mead Johnson Nutrition CO (NYSE:MJN) in multiple transactions on September 1 at a weighted average price of $76.61, reducing her stake to 6,142 shares. Mead Johnson Nutrition CO (NYSE:MJN) is a pediatric nutrition company with a portfolio of more than 70 products. After remaining flat during the first quarter, its stock has been gradually declining since April and has lost more than 25% year-to-date. In July, Mead Johnson Nutrition CO (NYSE:MJN) lowered its annual sales growth for fiscal 2015 on a constant-dollar basis to the range of 0-2%, from 7% that it had expected earlier. Additionally, the company also lowered its GAAP EPS to $3.56 – $3.71 range, from the previous $3.79 – $3.89. At the end of July, Mead Johnson Nutrition CO (NYSE:MJN) agreed to pay $12 million to the Securities and Exchange Commission to settle bribery charges against its Chinese subsidiary, which was alleged to have bribed hospitals’ employees to recommend its infant formula to new or expecting mothers. Among the investors we track, Ken Griffin‘s Citadel Investment Group upped its stake Mead Johnson Nutrition CO (NYSE:MJN) by 54% to 2.24 million shares during the second quarter.
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