Noteworthy Insider Selling Observed At These Three Companies

It is already common knowledge that inside selling does not serve as a perfect indicator of future stock performance, mainly due to the increased usage of stock-based compensation. This implies that both directors and executives are mostly selling shares for reasons unrelated to their companies’ current developments or future market conditions. Corporate insiders usually tend to cash out their freshly-vested stock options right away, so insider trading observers should generally ignore this type of activity. But there are some kinds of insider selling that investors should pay close attention to: clusters of insider selling, high dollar volume of insider sales, and insider selling at struggling companies. However, investors should not interpret insider selling as though insiders do not believe in their companies’ future potential anymore, but rather look at this type of activity as a sign of “fair” valuation. It is hard to estimate the true value of a company, and corporate insiders have their own perceptions on whether their company is fairly valued or not. The history shows that companies with heavy insider selling tend to underperform companies witnessing insider buying, which means that insiders do have a better sense of the true valuation of their companies. Having said that, the following article will examine the recent insider selling registered at three companies, as well as discuss the recent performance of those companies.

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To begin with, TJX Companies Inc. (NYSE:TJX) saw one of its top-tier executives unload shares last week. Executive Chairman Carol Meyrowitz discarded 64,800 shares last Friday at prices that ranged from $75.19 to $75.72 per shares and trimmed her stake to 454,521 shares. Carol Meyrowitz recently moved into the role of Executive Chairman, after successfully serving the helm of the company for nine years. President Ernie Herrman embarked on the CEO role at the end of January 2016.  TJX Companies Inc. (NYSE:TJX) has been growing at a solid pace under the leadership of Ms. Meyrowitz despite facing toughening competition in the off-price segment. The shares of the off-price apparel and home fashions retailer have advanced almost 10% over the past 52 weeks. TJX Companies Inc. (NYSE:TJX) operates more than 3,500 stores worldwide through four primary segments: Marmaxx, which operates T.J. Maxx, Marshalls and tjmaxx.com in the U.S.; HomeGoods in the U.S.; TJX Canada, which operates Winners, HomeSense and Marshalls in Canada; and TJX Europe, which operates T.K. Maxx, Home Sense and tkmaxx.com in Europe. The company’s net sales for fiscal 2016 that ended January 30 totaled $30.95 billion, up from $29.08 billion reported for the prior year. Its consolidated comparable store sales grew 5% year-on-year, after having grown 2% in the previous year. Moreover, TJX’s diluted earnings per share were $3.33 for fiscal 2016, which marked an increase of 5% year-on-year. The highly-successful company also intends to increase its quarterly dividend to $0.26 per share, which denotes an increase of 24% from the previous dividend. TJX is a soon-to-be Dividend Aristocrat considering its strong growth in recent years, as the company is on track to increase its annual dividend payment for the 20th consecutive year. There were 36 hedge funds from our system with stakes in TJX at the end of December 2015, which amassed 3% of the company’s outstanding shares. Ken Griffin’s Citadel Advisors LLC lifted its stake in TJX Companies Inc. (NYSE:TJX) by 70% in the December quarter to 1.93 million shares.

Let’s head to the next page of this insider article, which covers the insider selling activity registered at The Ultimate Software Group Inc. (NASDAQ:ULTI) and Avery Dennison Corp (NYSE:AVY).

The Ultimate Software Group Inc. (NASDAQ:ULTI) had one of its executives sell three blocks of shares this week. Senior Vice President and General Counsel Robert J. Manne unloaded an aggregate of 20,000 shares on Tuesday at prices ranging from $173.00 to $176.04 per share and cut his overall stake to 92,208 shares. A few more insiders have been jettisoning small portions of their holdings in the past several months. Witnessing insider selling when share prices are trending down is quite unusual and might serve as reason for concern among investors. The shares of Ultimate Software have embarked on a downtrend since early November 2015, partly because of concerns over depressed IT spending environment, which could result in lower demand for enterprise software. Ultimate Software Group is a cloud provider of people management solutions, widely-known as human capital management (HCM) solutions. The company’s UltiPro product suite assists companies with their HR, payroll, benefits, and talent management activities, among other things. Based on fresh customer counts and other market data, Ultimate Software Group has a market share of approximately 9% for enterprise companies (with more than 1,500 employees), 7% for mid-market companies (with 500-1,500 employees), and roughly 3% for strategic companies (100-499 employees). The cloud provider of people management solutions has enjoyed strong revenue growth in the past several years, with its revenues increasing to $618.08 million in 2015 from $505.94 million in 2014 and $410.40 million in 2013. The hedge fund sentiment towards Ultimate Software Group was positive in the fourth quarter, as the number of money managers with stakes in the company (among those we track) climbed to 22 from 16 quarter-on-quarter. Paul Tudor Jones’ Tudor Investment owns 253,623 shares of The Ultimate Software Group Inc. (NASDAQ:ULTI) as of the end of December 2015.

Avery Dennison Corp (NYSE:AVY) has also witnessed noteworthy insider trading activity on the sell side in the past week or so. Chairman and Chief Executive Officer Dean A. Scarborough unloaded 27,915 shares this Wednesday through multiple trades at prices in the range of $68.57 to $69.69 per share. The CEO currently holds 145,486 shares following the recently-completed sales. There were two other executives who sold shares in the past ten days, though their sales were connected with freshly-exercised stock options. The company’s business primarily involves the production of pressure-sensitive materials and a wide portfolio of tickets, tags, labels and other converted products. Shares of Avery Dennison are up 33% over the past 12 months even if the company experienced slower-than-expected growth in emerging markets throughout 2015. Avery Dennison’s net sales for fiscal year 2015 that ended January 2 totaled $5.97 billion, down from $6.33 billion reported for the prior year. Nonetheless, the company’s net sales grew approximately 5% year-on-year on organic basis. Emerging markets continue to represent an important growth catalyst for the company in the long term even though these markets have been struggling lately. The new wave of economic stimulus around the globe might however inject new dynamism into emerging markets’ economies. It is important to mention that Avery Dennison managed to generate revenue growth and double-digit adjusted earnings growth despite facing weakening economic conditions worldwide. Avery Dennison’s reported adjusted EPS for fiscal 2015 totaled $2.95, up from $2.56 reported for the previous year. Moreover, the company anticipates 2016 EPS in the range of $3.15 to $3.35 per share. Shares of Avery Dennison are currently trading at 16.68 times expected earnings, slightly above the forward P/E ratio of 16.55 for the S&P 500 Index. Jim Simons’ Renaissance Technologies reported owning 565,500 shares of Avery Dennison Corp (NYSE:AVY) in its latest 13F filing

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