Over the past several days we have seen the U.S. equity market go into a downward spiral, with the S&P 500 having lost 8% in a matter of just two weeks. In times like these, when the market is gripped with fear, is when insiders can step in and make a powerful statement about their conviction in their companies. Not only does them buying shares resonate well with investors, it can also provide some much-needed support to the overall market. At Insider Monkey, we always keep a close eye on the stocks which witness insider buying during times of uncertainty because if the insiders of a company truly have a long-term bullish outlook on it and display it by buying the company’s stock when it is falling, more often than not such stocks outperform the market in the future. In this article we are going to dissect insider buying that took place at the end of last week in three companies, when the S&P 500 witnessed a 1.53% fall. The companies in question are Bob Evans Farms Inc (NASDAQ:BOBE), P H Glatfelter Co (NYSE:GLT), and Performance Sports Group Ltd (NYSE:PSG).
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 60 months, outperforming the S&P 500 Index by nearly 60 percentage points (read the 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 restaurant operator Bob Evans Farms Inc (NASDAQ:BOBE). Mark Hood, who serves as the company’s Chief Financial Officer, acquired 2,200 shares at an average price of $44.72 on September 4, increasing his total holdings to 8,200 shares. Shares of Bob Evans Farms Inc (NASDAQ:BOBE) haven’t recovered much from the more than 22% drop they suffered on March 4 after the company reported disappointing numbers for its fiscal third quarter of 2015 and announced that it won’t separate its food business from the rest of the company. However, shares had a big spike on September 2 after the company declared its fiscal first quarter 2016 results, reporting EPS of $0.51, compared to analysts’ estimates of $0.30. Among the funds covered in our database, Rob Citrone‘s Discovery Capital Management was the largest shareholder of Bob Evans Farms Inc (NASDAQ:BOBE), possessing 1.9 million shares at the end of June.
Moving on, Nicholas Debenedictis, a Director at P H Glatfelter Co (NYSE:GLT), bought 2,500 shares of the company at an average price of $17.25 per share and now owns a total of 46,276 shares. P H Glatfelter Co (NYSE:GLT) is a Pennsylvania-based manufacturer of specialty paper and engineered fiber products. After remaining flat for the first three months of the year, P H Glatfelter Co (NYSE:GLT)’s stock began a gradual decline beginning on April 1, which continues until this day resulting, in a year-to-date loss of 32.7%. Analysts at Deutsche Bank reiterated their ‘Hold’ rating on the stock on August 7, while lowering their price target to $23 from $25, which still represents a potential upside of 32.53%. Chuck Royce‘s Royce & Associates reduced its stake in the company by 41% to 60,058 shares during the April-June period.
Finally, the CEO of Performance Sports Group Ltd (NYSE:PSG), whose stock has fallen by more than 30% since June, added 35,000 shares to his portfolio at an average price of $13.31. CEO Kevin Davis now owns 69,172 shares of the sports equipment and apparel manufacturer. Although the company reported EPS of $0.19 on revenue of $147.60 million for its fiscal fourth quarter of 2015 recently, compared to the EPS of $0.17 on revenue of $147.03 million that analysts had expected, its stock still nosedived by more than 8% following the earnings release. The continuing strength of the U.S. dollar versus other currencies remains one of the strongest headwinds faced by the company and most analysts expect it to impact Performance Sports Group Ltd (NYSE:PSG)’s earnings significantly during the next few quarters. Jim Simons‘ Renaissance Technologies initiated a stake in the company during the April-June period, purchasing 38,300 shares.
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