Noteworthy Insider Buying at This Biopharmaceutical Company and 2 Other Battered Companies

All major U.S indexes closed in the green on Friday, marking their fifth consecutive week of gains. The Standard and Poor’s 500 rebounded into positive territory for 2016 on Friday, while the Dow Jones Industrial Average, which has enjoyed a six-session rally, gained 2.3% for the week. The sustained recovery in crude oil prices and positive U.S economic data have alienated mounting worries in equity markets about the state of the U.S economy and market conditions. Considering the recent rally in U.S equities, most investors and analysts would expect weakening insider buying and surging insider selling, but just the opposite happened last week. Fresh data reveals that last week’s dollar volume of insider buying more than doubled relative to the previous week, whereas the volume of selling decreased significantly week-over-week. So what can one make of this phenomenon? It is highly likely that corporate insiders have started to believe in the underlying strength of the U.S economy and are attempting to capitalize on the broader market sell-off that occurred earlier this year. The Insider Monkey team processed the majority of Form 4 filings submitted with the SEC on Friday and identified three companies with noteworthy insider buying, so let’s take a look at the recent insider behavior of the three companies in question.

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).

Let’s begin our discussion with Minerva Neurosciences Inc. (NASDAQ:NERV), which had one member of its Board of Directors purchase a sizable block of shares. Director David J. Kupfer reported purchasing a new stake of 181,488 shares on Thursday at a price of $5.51 per share. Mr. Kupfer was appointed to the company’s Board of Directors in November 2015, so the timing of his purchase may be quite informative for investors (or the Director might have been restricted from buying shares due to a blackout period before the release of the company’s fourth-quarter earnings report).

Minerva Neurosciences Inc. (NASDAQ:NERV) is a clinical-stage biopharmaceutical company that focuses on the development of products for the treatment of patients suffering from central nervous system (CNS) diseases. The company’s portfolio of product candidates includes MIN-101 for the treatment of schizophrenia; MIN-202, co-developed with Janssen Pharmaceutica NV for the treatment of insomnia disorder and adjunctive major depressive disorder, simply known as MDD; MIN-117 for the treatment of MDD; and MIN-301 for the treatment of Parkinson’s disease. Earlier this month, Minerva pleased investors and stock market participants with positive top line results from a Phase Ib clinical trial of MIN-202, the aforementioned selective orexin-2 receptor antagonist designed to treat patients suffering from the major depressive disorder. These results allowed the company to move MIN-202 further in the process of drug development, which will involve a Phase IIb trail in patients suffering from this disease. Nonetheless, investors should be aware that none of Minerva’s product candidates have received FDA approval just yet, so the company is not generating any revenue associated with the sale or licensing of its products. There were four hedge funds in our system with stakes in the biopharmaceutical company at the end of December 2015, compared to three registered at the end of the prior quarter. These four funds amassed 13.40% of the company’s outstanding common stock. James Dondero’s Highland Capital Management reported owning 1.32 million shares of Minerva Neurosciences Inc. (NASDAQ:NERV) in its quarterly 13F for the October-to-December period.

The next two pages of this insider trading article discuss the insider buying witnessed at BMC Stock Holdings Inc. (NASDAQ:STCK) and Atlantic Power Corporation (NYSE:AT).

BMC Stock Holdings Inc. (NASDAQ:STCK) is another company that saw one of its Directors purchase shares this past week. Director James O’Leary bought two blocks of 5,000 shares on Wednesday at a weighted average price of $13.83, lifting his overall holding to 24,107 shares. This purchase comes nearly four months after Stock Building Supply Holdings merged with a privately-held building materials provider, called Building Materials Holding Corporation, to create a diversified lumber and building materials (LBM) distributor and solutions provider named BMC Stock Holdings.

The freshly-combined company expects to achieve run-rate cost synergies of $20 million-to-$25 million within the first year of the completion of its merger and $40 million-to-$50 million by the fourth quarter of 2017. As revealed by the U.S Census Bureau, multi-family housing starts in the nation reached 400,000 in 2015, increasing from 360,000 in 2014 and 310,000 in 2013. The continued tightening in the U.S labor market and sustained wage growth, as well as strengthening builder confidence and consumer sentiment, are anticipated to support new residential housing market growth throughout 2016. McGraw-Hill Construction anticipates multi-family housing starts to increase by 5% in 2016, but recent data suggests that this rate growth is not yet achievable. Housing starts for the multi-family segment rose to 356,000 in February. Even so, U.S housing starts recovered more-than-expected last month, registering their highest level in the past five months. This means that BMC Stock Holdings might be well-positioned to achieve cost synergies and attractive top-line growth without experiencing pressure from previously-anticipated worsening market conditions. A total of 15 hedge funds in our database had stakes in BMC at the end of 2015, compared to 11 registered at the end of the previous quarter. Shares of newly-formed BMC Stock Holdings are down by 13% year-to-date, which has persuaded some analysts to rate the stock as being undervalued. D.E. Shaw & Co. L.P., founded by David E. Shaw, owns 2.23 million shares of BMC Stock Holdings Inc. (NASDAQ:STCK) as of December 31.

The insider buying activity at Atlantic Power Corporation (NYSE:AT) has been extremely high over the past several months, which should attract investors’ attention. To start with, Director Gilbert Samuel Palter bought 35,700 shares on Thursday at a cost of $2.07 each, enlarging his overall stake to 395,000 shares. All of these shares are held by EGADS Enterprises Inc., a bare trust of which the Director is the sole shareholder. Mr. Palter snapped up an additional 5,000 shares last Monday at a price of $2.07 per share, as well as 4,300 shares on March 10. Kevin T. Howell, another experienced member of the company’s Board of Directors, acquired 60,000 shares last week at $2.10 apiece, boosting his direct ownership stake to 120,000 units of common stock.

Atlantic Power Corporation owns and operates a fleet of power generation assets in the United States and Canada, with its power generation projects (natural gas, coal and biomass power generation projects) selling electricity to utilities and other large commercial customers predominantly under long-term power purchase agreements (PPAs). These PPAs are aimed at reducing the company’s exposure to changes in commodity prices, which have been quite volatile indeed. Atlantic Power’s PPAs have expiration dates that range from December 31, 2017 to December 31, 2037. In February 2016, the company’s Board of Directors, in accordance with management’s recommendation, eliminated common share dividend payments, a move that is anticipated to improve the company’s financial flexibility and strengthen its balance sheet. To be more detailed, this optional capital will be channeled towards equity and debt repurchases, with the aim of capturing value associated with available price-to-value opportunities in its publicly-traded securities. This might also point to the fact that Atlantic Power’s shares, which are down by 23% over the past 52 weeks, are undervalued relative to the company’s intrinsic value. It should be noted that the stock has advanced by 12% since the beginning of 2016, so it appears to be heading in the right direction. More importantly, Standard & Poor’s upgraded Atlantic Power’s corporate credit rating to B+ from B in February, while Moody’s upgraded it to B1 from B2 in October 2015. According to a Schedule 13D filing submitted with the SEC in February, Nathaniel August’s Mangrove Partners owns 8.18 million shares of Atlantic Power Corporation (NYSE:AT).

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