Insiders Giving Strong Vote of Confidence to Chesapeake Energy (CHK) And These 2 Companies

No one can deny that corporate executives and directors generally have more knowledge and insight about their companies’ future prospects and developments than anyone else. While they are not allowed to trade on material non-public information, they do have their own perception about the current state of the industry their companies are operating in and the potential of their companies. Corporate insiders are well-informed about the cyclical trends, order flow, production bottlenecks, and a wide array of other factors that influence their companies’ businesses, so their insider trades may offer useful information for individual investors. Extensive research has provided evidence that insider purchases tend to outperform the broader market, which is the primary reason why Insider Monkey tracks this type of activity. Having said that, the following article will discuss the noteworthy insider buying activity registered at three companies recently, and their performance over the past several months.

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 102% over the ensuing 38 months, outperforming the S&P 500 Index by more than 53 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 begin our discussion by investigating the insider buying noticed at SunOpta Inc. (USA) (NASDAQ:STKL), which has seen three insiders purchase stock thus far this week. Director Michael Detlefsen reported purchasing 10,000 shares on Tuesday at a price of CAD$9.00 ($6.79) per share, increasing his stake to 44,461 shares. Douglas Greene, another Director on SunOpta Inc. (USA) (NASDAQ:STKL)’s Board, snapped up 50,000 shares on the same day at a price of $7.02 per share. After the recent sizable purchase, the Director holds 200,543 shares. Last but not least, President and Chief Executive Officer Hendrik Jacobs bought 15,000 shares on Monday at $6.87 apiece and currently owns 34,638 shares.

Earlier this month, the company that operates businesses focused on organic, non-genetically modified foods reported its third quarter financial results, which were quite well received by the market. The company’s revenues decreased to $306.0 million from $307.9 million year-over-year, partially owing to its high exposure to fluctuations in foreign exchange rates. SunOpta reported earnings from continuing operations of $0.4 million, compared to a loss of $0.6 million reported for the third quarter of last year. 15 hedge funds monitored by Insider Monkey had positions in the company at the end of the June quarter, accumulating 23.80% of its outstanding common stock. According to a freshly-submitted 13D filing, Jason Karp’s Tourbillon Capital Partners holds 8.08 million shares of SunOpta Inc. (USA) (NASDAQ:STKL), accounting for 9.5% of its shares.

The second page of this daily insider trading article discusses the insider buys at Extended Stay America Inc. (NYSE:STAY) and Chesapeake Energy Corporation (NYSE:CHK).