Massive Insider Selling at Northrop Grumman (NOC) and Chinese Biotech, While Insider Buying Observed at 3 Other Companies

Peter Lynch, the former manager of the Magellan Fund at Fidelity Investments, once said that “Insiders might sell their shares for any number of reasons, but they buy them for only one: They think the price will rise.” Of course, the well-known investment guru is not the only successful money manager who believes that insider buying activity should be interpreted as a bullish signal. A number of hedge fund vehicles incorporate insider trading metrics into their broader stock selection and analysis process.

Corporate insiders, namely board members and executives, know a lot more about their company’s business fundamentals and future prospects than anyone else, which is why investors would be wise to keep a close eye on how insiders are trading shares. These informed individuals are way ahead of analysts and portfolio managers, which is why their purchases tend to outperform broader market benchmarks on aggregate. Meanwhile, the investment community appears to be ignoring insider selling activity, as most insider trades are made through trading plans or after the exercising of stock options, which makes it more difficult to pinpoint the most useful trading activity (and there’s a lot of insider trading noise out there from certain other sites featured on Google Finance that shall remain nameless). That’s where we come in. Our daily insider trading articles feature only the most relevant insider trading activity that was not carried out through trading plans or after stock options were recently exercised. The following article will do just that, discussing the fresh insider trading activity at five companies.

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 imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).

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Board Member of This U.S. Pharmaceutical Manufacturer Buys Some Shares

Eli Lilly and Co (NYSE:LLY) was one of the few companies that had insider buying activity this past week amid U.S. stock indexes hitting new all-time highs. Board member Jackson Peter Tai snapped up 2,560 shares on Friday at prices of $80.42-to-$80.43 per share, lifting his overall holding to 42,110 shares.

The U.S. pharmaceutical manufacturer recently said that its investigational cancer-fighting drug, called abemaciclib, failed to meet efficacy criteria in an interim analysis of a Phase 3 trial for the treatment of breast cancer. Even so, the independent panel that conducted the interim analysis recommended Eli Lilly and Co (NYSE:LLY) to continue the trial, which is designed to evaluate the safety and efficacy of abemaciclib in combination with the anti-estrogen drug fulvestrant, in patients suffering with a form of advanced breast cancer. Eli Lilly shares are 5% in the red thus far in 2016. Andreas Halvorsen’s Viking Global trimmed its position in Eli Lilly and Co (NYSE:LLY) by 21% during the June quarter to 9.38 million shares.

Board Member of This BDC Buys Some Shares Through Public Offering

According to our insider trading database, Golub Capital BDC Inc. (NASDAQ:GBDC) had not registered any insider buying since late 2015, until this week. Board member John T. Baily snatched up 8,250 shares on Monday at a price tag of $18.35 each. Following the recent purchase, Mr. Baily currently owns 23,179 shares.

Golub Capital BDC Inc. (NASDAQ:GBDC) operates as a business development company that invests primarily in senior secured and one-stop loans to U.S. mid-market companies. The shares of the BDC were trading above its net asset value per share of $15.88 at the end of June, so one should have anticipated the company to issue more stock to channel capital into a strong pipeline of deals. To that end, Golub Capital BDC currently plans to offer 1.75 million shares at a public offering price of $18.35 per share by the end of the week. The BDC has seen its market value spike by 12% since the beginning of the year. Robert B. Gillam’s McKinley Capital Management acquired a new stake of 105,281 shares of Golub Capital BDC Inc. (NASDAQ:GBDC) during the April-to-June period.

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

Top Executive of This Defense Contractor Jettisons Sizeable Block of Shares

A sizable insider sale was registered at Northrop Grumman Corporation (NYSE:NOC) this past week. Thomas E. Vice, Corporate Vice President and President of Northrop Grumman’s Aerospace Systems sector, discarded 20,997 shares on Friday at prices ranging from $217.55 to $218.18 per share. Following the recent sale, Mr. Vice currently holds an ownership stake of 82,496 shares.

The shares of the leading global security company are 15% in the green in 2016. Just recently, the defense contractor raised its full-year earnings outlook after its second quarter financial results beat analysts’ expectations. Northrop Grumman Corporation (NYSE:NOC) anticipates earnings in the range of $10.75-to-$11.00 per share for the year, up from the previous forecast of $10.40-to-$10.70 per share. In 2015, the company won a big contract to build new bombers for the U.S. Air Force, worth around $80 billion. The number of billionaire hedge fund managers followed by Insider Monkey with long positions in Northrop Grumman jumped to ten from five during the second quarter. Bruce Kovner’s Caxton Associates reported ownership of 203,500 shares of Northrop Grumman Corporation (NYSE:NOC) through the latest 13F filing period.

Insiders Are Running Away From This Chinese Biopharmaceutical Company

Five different insiders of China Biologic Products Inc. (NASDAQ:CBPO) offloaded shares earlier this week, so let’s have a look at the most voluminous sales. To start with, Chief Financial Officer Ming Yang sold 21,092 shares on Monday at prices that fell between $124.00 and $125.13 per share, cutting his ownership to 24,782 shares. Ming Yin, Senior Corporate Vice President, discarded 20,334 shares on the same day at a weighted average price of $124.32 per share, which cut his overall holding to 16,467 shares. Corporate Vice President Gang Yang offloaded 8,400 shares on Monday at prices ranging from $124.00 to $125.13 per share. After the recent transaction, Mr. Yang currently owns 32,242 shares.

The Chinese biopharmaceutical company engaged in the research, development and manufacturing of human plasma-based biopharmaceutical products has seen its market cap decline by 14% since the start of the year. China Biologic Products Inc. (NASDAQ:CBPO)’s sales for the three months ended June 30 rose by 15.5% year-over-year to $91.4 million. Excluding foreign currency headwinds, the company’s sales would have increased by 23.4%. Jim Simons’ Renaissance Technologies was the owner of 229,000 shares of China Biologic Products Inc. (NASDAQ:CBPO) at the end of June.

Disclosure: None