Generally, corporate executives have the most relevant and up-to-date information of the factors that might affect their company in the future. After all, they are the ones running the company. In most cases, corporate executives’ trades bears some information about the future outlook of their company. A researcher in the field of insider trading at the University of Michigan, Nejat Seyhun, provided undeniable evidence that tracking insider activity is profitable. Precisely, the renowned professor and researcher found that when corporate executives acquired shares in their own companies, the stock outpaced the market by 8.9% over one-year period. Equally, when corporate executives unloaded shares, the stock underperformed the market by 5.4%. In addition to that, a number of other studies have found that regular investors could similarly generate sizable returns by imitating insiders. Therefore, in the following article we’ll pinpoint three companies that have witnessed a large volume of insider transactions in terms of monetary value recently. These three companies are: Rent-A-Center Inc. (NASDAQ:RCII), Air Products & Chemicals Inc. (NYSE:APD), and Pfizer Inc. (NYSE:PFE).
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However, insider trading is not the main focus of our research at Insider Monkey. We mainly track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 123.1% and beating the market by more than 66 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
Let’s check these companies out, beginning with Rent-A-Center Inc. (NASDAQ:RCII), which has seen unfamiliar insider buying activity today. Robert D. Davis, the Chief Executive Officer and Director at Rent-A-Center, has made two purchases of 2,500 shares each at average prices of $26.75 and $26.96 per unit. Following these transactions, Robert Davis owns 65,595 shares. Although the shares of Rent-A-Center are down by nearly 26% year-to-date, analysts are bullish on the company as its recently-published second quarter financial results were in line with the analysts’ expectations. Cantor Fitzgerald, one of the premier capital market investment banks, has recently raised the price target for Rent-A-Center to $45 a share from $43. Analysts also claim that the rent-to-own retailer’s transition to a flexible labor model is moving forward as anticipated, while its cost savings plans that are likely to be generated through its sourcing and distribution initiatives will indubitably push the stock higher. Phill Gross and Robert Atchinson’s Adage Capital Management, with its stake of 2.38 million shares, represents the largest investor in Rent-A-Center Inc. (NASDAQ:RCII) within our database.
