Sell Stock With Insiders: Executives Unloading Shares of These Three Companies

The third-quarter earnings season is now well under way, but it has not turned out to be as gloomy as analysts previously anticipated just yet. Statistics reveal that more than two-thirds of the 78 Standard and Poor’s 500 companies, that have already disclosed their third-quarter earnings reports, outpaced analysts’ expectations. Analysts polled by Thomson Reuters anticipated third-quarter earnings to decline by 3.9%, compared to previous estimations of earnings growth of 7.4% at the beginning of the year. Of course, the downward revisions on earnings growth might have increased the likelihood of companies beating expectations. At the same time, the Dow Jones Industrial Average has gained 5.77% since the beginning of October despite low expectations for the ongoing earnings season. However, some companies’ insiders have started to unload their holdings lately, which could somewhat suggest that the prospects of those companies do not look so strong at the moment. The Insider Monkey team pinpointed three companies with strong insider selling activity, and will try to find out what might have guided those insiders to sell shares. It is true that insiders might sell shares for numerous reasons unrelated to their companies’ future outlook, which is why one should accurately interpret this type of activity.

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But first, you should get acquainted with what Insider Monkey specializes at and what it can offer. At Insider Monkey, we 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 the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 102% and beating the market by more than 53 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 begin our discussion by looking into the insider selling activity at Delta Air Lines Inc. (NYSE:DAL). Wayne Gilbert West, Chief Operating Officer and Executive Vice President since March 2014, unloaded 20,500 shares on Monday at a weighted average sale price of $49.92. The COO currently holds an ownership stake of 93,275 shares. Moreover, Chief Revenue Officer and Executive Vice President Glen W. Hauenstein sold a 40,000-share block on the same day at prices ranging from $50.06 to $50.15, trimming his stake to 133,378 shares. The shares of the airline company are currently trading above the $50 level, previously reaching this price level on only one occasion (at the end of January, 2015). Therefore, it is no surprise that the executives have been reducing their holdings, considering that the stock has not traded well-beyond this level. Just recently, Delta Air Lines Inc. (NYSE:DAL) disclosed its third-quarter financial results, posting adjusted net income per share of $1.74, which was up 45% year-over-year. Ken Griffin’s Citadel Investment Group significantly boosted its stake in Delta Air Lines Inc. (NYSE:DAL) during the second quarter, ending it with 8.21 million shares.

The next page of this article covers the insider selling activity at a financial services company and a specialty retailer of beauty supplies.

Financial services holding company U.S. Bancorp (NYSE:USB) is another company that has witnessed heavy insider trading activity on the sell side recently. Terrance R. Dolan, Vice Chairman of Wealth Management and Securities Services, sold 6,150 shares earlier this week at a price of $40.86 per share and reduced his holdings to 22,815 shares. He also holds an indirect ownership stake of 5,252 shares. This move comes after U.S. Bancorp (NYSE:USB) reported record quarterly earnings per diluted share (EPS) of $0.81 last Thursday. The company reported EPS of $0.78 in the same period last year. At the same time, the financial services company posted total revenues of $5.15 billion, compared to $4.99 billion reported a year ago. Even so, the stock is still 8% in the red year-to-date, so it is hard to stipulate what might have propelled the executive to sell shares. Warren Buffett’s Berkshire Hathaway is by far the largest stockholder of U.S. Bancorp (NYSE:USB) within our database, owning a stake of 85.06 million shares as of June 30.

Lastly, we will investigate the insider trading activity at Sally Beauty Holdings Inc. (NYSE:SBH), a specialty retailer and distributor of professional beauty supplies. Executive Chairman Gary G. Winterhalter unloaded 5,805 shares on Tuesday at a price of $24.02 per unit. Earlier this month, the executive chairman sold an additional 7,082 shares for $23.85 each. As a result, Gary Winterhalter currently holds 149,634 shares. The shares of Sally Beauty Holdings Inc. (NYSE:SBH) are currently seeking their bottom and have not been trading at such low levels since the end of 2012. The stock has lost nearly 22% since the beginning of the year, so it is quite surprising that the Executive is offloading his holdings at the current price level. The company anticipates that its business will be affected by substantial labor and rental cost inflation in the upcoming quarters, which will most likely impact its operation earnings growth. Shane Finemore’s Manikay Partners held its stake in Sally Beauty Holdings Inc. (NYSE:SBH) unchanged during the June quarter, at 2 million shares.

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