Noteworthy Insider Trading Activity at These 5 Companies as Insider Buying Ratio Increases

Last week’s dollar volume of all insider purchases almost doubled week-over-week, whereas the volume of insider selling decreased quite meaningfully relative to the volume of selling recorded for the previous week. While a decrease in the ratio of insider selling over insider buying might represent good news for the investment community, the aggregate insider trading behavior is not as informative as the insider trading activity registered at individual companies. The standard rule of thumb is that insider buying indicates that corporate insiders believe their own companies’ shares are undervalued. Similarly, heavy insider selling is generally perceived as a bearish signal, but this type of activity should be interpreted with caution. The main issue with insider selling is that directors and executives can sell shares for a wide array of reasons that may not necessarily be related to the financial valuations or future prospects of their companies. That being said, the following insider trading article will discuss several noteworthy insider trading transactions reported with the SEC on Friday.

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).

Reed’s Had Three Influential Executives Purchase Shares Last Week

Reed’s Inc. (NYSEMKT:REED)’s Senior Vice President of Sales and Marketing, Neal Cohane, purchased 10,000 shares on Thursday for an aggregate price of $39,000, lifting his overall holding to 158,573 shares. Daniel V. Miles, Chief Financial Officer since May 2015, acquired a new stake of 10,000 shares on the same day for $3.90 each. Most notably, Founder and Chief Executive Officer of Reed’s, Christopher J. Reed, snapped up a 10,000-share block on Thursday at the same $3.90 per share price tag. After the recent purchase, Mr. Reed currently holds a direct ownership stake of 3.22 million shares.

The manufacturer and seller of beverages, candies and other ginger-related products has seen its market value drop by 27% since the start of the year. Reed’s Inc. (NYSEMKT:REED)’s net sales for the first quarter of 2016 were $10.00 million, down from $10.67 million reported a year earlier. The decrease was mainly driven by increased promotional costs and lower sales volume. Meanwhile, candy sales continued to be impacted by a California lawsuit that required the company to find alternative suppliers. Jim Simons’ Renaissance Technologies LLC owns 52,800 shares of Reed’s Inc. (NYSEMKT:REED) as of March 31.

On the next two pages of this insider trading article we’ll discuss the insider trading transactions registered at four other companies last week.

Ariad Pharmaceuticals CEO Fulfills Agreement to Purchase $500,000 Worth of Stock

According to a fresh Form 4 filing, Ariad Pharmaceuticals Inc. (NASDAQ:ARIA)’s President and Chief Executive Officer, Paris Panayiotopoulos, purchased 26,990 shares on Thursday at a price of $7.41 per share. Following the recent purchase, the CEO currently owns 88,089 shares. However, the purchase was conducted in relation to the terms of his employment agreement, under which Mr. Panayiotopoulos had to purchase $500,000 worth of stock within the first year of his employment, so this particular insider buying activity shouldn’t necessarily represent a bullish outlook.

The shares of the oncology company that seeks to transform the lives of cancer patients with breakthrough medicines have gained 22% since the beginning of 2016. Earlier this month, Ariad Pharmaceuticals Inc. (NASDAQ:ARIA) sealed an agreement with Incyte Corporation (NASDAQ:INCY) to divest its European operations and license the European rights to cancer medicine Iclusig for an upfront payment of $140 million. Ariad will also receive tiered royalties of 32%-to-50% of net sales of Iclusig in Europe, as well as up to $135 million in potential development and regulatory milestones for Iclusig in new indications. Mitchell Blutt’s Consonance Capital Management added a 5.58 million-share stake in Ariad Pharmaceuticals Inc. (NASDAQ:ARIA) to its portfolio during the March quarter.

Matrix Service Had Two Board Members Buy Shares This Past Week

Jim W. Mogg, a member of Matrix Service Co (NASDAQ:MTRX)’s Board of Directors, purchased 10,000 shares on Thursday at prices that ranged from $14.98 to $15.35 per share, lifting his ownership to 21,990 shares. Moreover, Director James H. Miller acquired 325 units of common stock on Thursday for $15.10 each, which increased his stake to 10,930 units.

Matrix Service Co (NASDAQ:MTRX) offers engineering, fabrication, construction, and repair and maintenance services to several markets including the oil and gas markets. Matrix Service shares have plummeted by 20% since the start of the year, partly owing to disappointing financial results for the third quarter of fiscal year 2016 ended March 31. As a result, the company’s management reduced its full fiscal year 2016 revenue guidance to $1.275 billion-to-$1.325 billion from a prior total of $1.3 billion-to-$1.4 billion, citing weak commodity prices. Nonetheless, one should note that the company has a really strong balance sheet, with cash on hand amounting to $73.4 million as of March 31 and availability under its credit facility reaching $166.5 million. Matrix Service’s borrowings under its senior credit facility were a mere $3.85 million on March 31. Small-cap specialist Royce & Associates, founded by Chuck Royce, owned 2.76 million shares of Matrix Service Co (NASDAQ:MTRX) at the end of March.

PDC Energy Saw Board Member Unload Sizable Block of Shares Last Week

Director James M. Trimble, who served as the CEO and President of PDC Energy Inc. (NASDAQ:PDCE) from June 2011 through June 2014, discarded 105,881 shares on Wednesday at prices varying from $60.02 to $60.71 per share. Following the massive sale, Mr. Trimble currently owns 132,760 shares of PDC Energy.

The independent exploration and production company has seen its shares gain 16% since the beginning of 2016. PDC Energy Inc. (NASDAQ:PDCE)’s production volumes for the first quarter of 2016 reached 4.6 million barrels of oil equivalents (MMboe), an increase of 58% year-over-year. The increase was mainly driven by the successful horizontal Niobrara and Codell drilling program in the Wattenberg Field. In March, the company raised roughly $296.6 million through a public offering of 5.92 million shares, a portion of which was used to repay all amounts outstanding under its revolving credit facility. The remaining amounts were said to be used to repay the principal amounts of convertible notes in May, as well as cover general corporate expenses. Wayne Cooperman’s Cobalt Capital Management acquired a new stake of 192,704 shares of PDC Energy Inc. (NASDAQ:PDCE) during the March quarter.

Louisiana-Pacific Registered Noteworthy Insider Selling Last Week

Brian E. Luoma, Senior Vice President of Siding at Louisiana-Pacific Corporation (NYSE:LPX), sold 10,792 shares on Wednesday at $18.53 per share, cutting his stake to 74,534 shares. Meanwhile, Chief Executive Officer Curtis M. Stevens offloaded a massive block of 116,100 shares for $18.49 each, trimming his ownership to 359,418 shares.

The shares of the supplier of building materials are up by 19% in the past three months, but by less than 1% year-to-date. Louisiana-Pacific Corporation (NYSE:LPX)’s manufacturing facilities are mainly located in the United States and Canada, but the company also has two facilities in Chile and one in Brazil. Consumer demand for the company’s products strongly correlates with the level of residential construction activity in North America. The U.S Department of Census reported that U.S single and multi-family housing starts for the first quarter of 2016 were 15% higher year-over-year, which explains why the company’s sales for the quarter were up by 7% year-over-year. Robert Bishop’s Impala Asset Management reported ownership of 848,390 shares of Louisiana-Pacific Corporation (NYSE:LPX) through the latest round of 13F filings.

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