Intuit Inc. (INTU), Copart Inc. (CPRT), and J M Smucker Co (SJM) Have Insiders Jettison Shares at an Alarming Pace

Corporate insiders, particularly managers and Board members of publicly traded corporations, generally possess a lot more up-to-date information about their company than any analyst or other outsider. While insider purchases mostly convey positive information about a company’s future prospects, it is not entirely clear what information insider sales convey. At the end of the day, there is a wide variety of motives for insiders to sell shares, including liquidity needs or need to reduce risk by diversifying, so some insider sales may be less informative to the investment community.

Although most researchers studying the ability of insiders to time the market conclude that insider selling is not indicative of future performance, investors would be wise to incorporate insider selling metrics into their stock selection and analysis process. The main argument for tracking insider selling is that insiders tend to sell shares when their companies’ valuations are approaching or even exceeding their “true” and “fair” market value. Put it differently, insiders’ contrarian approach to investing may point to clear exit points for equity investments. With this in mind, the following article will discuss the recent insider selling activity registered at three U.S. publicly traded companies.

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Provider of Financial Management Services Registers Insider Selling

Intuit Inc. (NASDAQ:INTU) has seen three different insiders unload shares so far in June, albeit two of them sold freshly-exercised stock options. Laura A. Fennell, Executive Vice President, General Counsel and Secretary, discarded 10,056 shares on Monday at prices ranging from $107.26 to $107.41 per share. Following the recent purchase, Ms. Fennell continues to own a mere 1,530 shares.

The maker of QuickBooks and TurboTax software products has seen its shares advance by 11% since the beginning of 2016. Intuit Inc. (NASDAQ:INTU)’s QuickBooks small business accounting software assists businesses in tackling accounting and payroll, while TurboTax represents the best-selling tax software. The company has greatly benefited from the global market transition from paper-based, human-produced, and brick-and-mortar bound services to connected services. Indeed, the increased availability of the Internet has revolutionized the way people are managing their financial tasks. Intuit’s net revenue for the first nine months of fiscal 2016 that ended April 30 was $3.9 billion, up 13% relative to the same period of the prior fiscal year.

Intuit fell out of favor with the hedge funds followed by Insider Monkey during the first quarter of 2016, as the number of funds invested in the company declined to 21 from 25 quarter-over-quarter. The 21 asset managers accumulated nearly 3% of the company’s total number of outstanding shares. The provider of business and financial management solutions pays shareholders a quarterly dividend of $0.30 per share, which equates to an annual dividend yield of 1.11%. Ken Griffin’s Citadel Advisors LLC upped its position in Intuit Inc. (NASDAQ:INTU) by 14% during the March quarter to 2.37 million shares.

The next page of this article will discuss the insider selling activity registered at two other companies.

Leading Salvage Auto Auction Company Has One Executive Sell Shares

Copart Inc. (NASDAQ:CPRT) has seen a couple of insiders sell shares thus far in 2016, so let’s have a quick look at the most recent insider activity. Paul A. Styer, General Counsel since September 1992 and Senior Vice President since April 1995, sold 13,590 shares on Monday at prices that ranged from $49.25 and $49.51 per share. The freshly-sold block of shares was held in a trust fund called Styer Revocable Trust, which currently holds a stake of 86,460 Copart shares.

The shares of the provider of online auctions and vehicle remarketing services have surged by 28% since the beginning of 2016, which explains the recent insider selling at the company. Copart Inc. (NASDAQ:CPRT)’s service revenues, which account for 87% of the company’s top line, for the nine months that ended April 30 grew by 9.9% year-over-year to $814.89 million. The increase was mainly driven by higher services revenues in North America, which reflected an increase in volume due to higher salvage frequency. The increase was partially offset by a marginal decrease in revenue per car due to lower auction selling prices on average. The operator of facilities that process and sell salvage vehicles to licensed dismantlers, rebuilders and used-vehicle dealers plans to open 15 new locations over the next 12 months.

The hedge fund sentiment towards Copart declined meaningfully during the January-to-March period, as the number of funds from our system with stakes in the company fell to 23 from 33 quarter-over-quarter. Royce & Associates, founded by Chuck Royce, was the owner of 2.53 million shares of Copart Inc. (NASDAQ:CPRT) at the end of March.

Food Giant Registers More Insider Selling

Soon after J M Smucker Co (NYSE:SJM) had three corporate insiders sell shares in mid-June, two other executives followed suit. Jeannette L. Knudsen, Senior Vice President, General Counsel and Corporate Secretary, sold 1,600 shares on Monday at prices that ranged from $145.50 to $145.52 per share, cutting her direct ownership stake to 18,702 shares. Moreover, Barry C. Dunaway, President of Big Heart Pet Food and Snacks, offloaded 3,026 shares on Friday at prices ranging from $144.58 to $144.60 per share, as well as offered 2,000 shares as a bona-fide gift. After the recent transactions, Mr. Dunaway continues to hold 46,443 shares.

The manufacturer of branded food and beverage products known for its jelly has seen its market capitalization spike by 18% since the beginning of 2016. This strong stock performance was followed by a rating downgrade at Jefferies, whose analysts downgraded J M Smucker Co (NYSE:SJM) to “Hold” from “Buy” earlier this month. However, Jefferies analysts increased their price target to $143 from $140, saying that the rating downgrade reflects balanced risks and rewards. Meanwhile, analysts at Credit Suisse reiterated their “Outperform” rating on the food giant and increased the price target on the stock to $158 from $156, citing “solid gains in peanut butter, pet treats, shortening, and spreads”. Moreover, the investment hub also cited management’s costs savings target of $50 million by closing three manufacturing plans as yet another positive catalyst.

A total number of 27 hedge fund vehicles followed by our team were invested in J M Smucker at the end of March, accumulating nearly 5% of its total number of outstanding shares. Dan Loeb’s Third Point LLC cut its stake in J M Smucker Co (NYSE:SJM) by 54% during the first three months of 2016 to 775,000 shares.

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