Surging Insider Buying Despite Market Rally, Headlined by Purchases at These 3 Companies

Fresh statistics reveal that last week’s volume of insider buying increased significantly week-over-over, despite the markets enjoying a three-day rally last week, which makes us think that corporate insiders do not want to miss out on a potential bull-run in U.S equities. Last week’s insider selling activity also increased relative to the previous week, but the ratio of insider selling to insider buying still dropped quite noticeably week-over-week. This outcome is great news for investors and other market participants, as the recent surge in insider buying seems to suggest that high-ranking executives believe in the strength of the U.S economy and in the health of its stock market. With that in mind, the following article will focus on the recent insider buying activity witnessed at three companies, as well as discuss the performance of the 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 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 Blackbaud Inc. (NASDAQ:BLKB), which had a member of its Board of Directors buy a large number of shares last week. Director Peter J. Kight purchased 8,469 shares on Wednesday and 52,175 shares on Thursday at prices that ranged from $53.41 to $57.18 per share, lifting his overall holding to 74,149 units of common stock. The shares of the provider of software and services for the philanthropic community are up by 21% over the past 12 months despite losing 14% since the beginning of 2016. The company’s portfolio of software and services supports non-profit fundraising and relationship management, eMarketing, advocacy, accounting, and payments and analytics, among other things.

Blackbaud Inc. (NASDAQ:BLKB) had a great 2015 in terms of both stock and financial performance, as its total revenue grew by 13% year-over-year to $637.9 million. The transition of the company’s solutions portfolio to the cloud spurred additional growth last year and the company’s management anticipates 2016 non-GAAP revenue to be in the range of $725.0 million to $740.0 million. The South Carolina-based company also intends to expand its addressable market in the upcoming years, which will most likely unlock additional revenue streams. The stock trades at a rather rich forward P/E multiple of 24.10, which is well above the ratio of 14.20 for the Information Technology industry. However, investors should keep in mind the company’s pace of growth, which seems to justify the rich valuation. Last week, research firm Wunderlich initiated coverage on Blackbaud with a ‘Buy’ rating. Robert Joseph Caruso’s Select Equity Group acquired a new stake of 535,024 shares in Blackbaud Inc. (NASDAQ:BLKB) during the final quarter of 2015.

The next page of this article reveals the recent insider purchases registered at Olin Corporation (NYSE:OLN) and Jones Lang LaSalle Inc. (NYSE:JLL).

Olin Corporation (NYSE:OLN) has seen intensifying insider buying activity over the past month or so, as three different executives purchased shares last week. To start with, Chairman and Chief Executive Officer Joseph D. Rupp snapped up 70,000 shares on Thursday at a price of $14.26 per share, lifting his direct ownership stake to 543,293 shares. The CEO also holds an indirect ownership stake of 79,123 shares, held under the Olin Common Stock Fund of the Olin Corporation Contributing Employee Ownership Plan (CEOP). Treasurer and Vice President Stephen C. Curley purchased 5,000 shares two days earlier at a cost of $13.38 per unit and currently owns 20,837 shares. Last but not least, Vice President John M. Sampson acquired 5,000 shares on the same day at $13.84 apiece and currently holds a stake of 11,931 shares.

In October 2015, Olin Corporation successfully consummated the acquisition of Dow Chemical Co (NYSE:DOW)’s U.S chlor alkali and vinyl, global chlorinated organics and global epoxy businesses. The freshly-enlarged company anticipates realizing synergies in the range of $40 million to $60 million in 2016, with an annualized run rate of roughly $70 million going into 2017. Reportedly, Olin Corporation’s corporate insiders recently had their phantom stock holdings vest and settle automatically in cash, which partly explains the recent insider buying activity. However, the fact that insiders have been reinvesting some proceeds into their own company’s stock is surely a bullish signal. The shares of the company are down by 45% over the past year, but began to embark on a steady uptrend a few weeks ago. Most importantly, the company has a very cheap valuation relative to its peers, considering that Olin has a forward P/E multiple of only 8.54, while the Specialty Chemicals industry has a ratio of 18.40. Jeffrey Gates’ Gates Capital Management added a 3.18 million-share position in Olin Corporation (NYSE:OLN) to its portfolio during the fourth quarter.

Jones Lang LaSalle Inc. (NYSE:JLL) had not seen any Directors or Executives buy shares since early 2011, until this month. President and Chief Executive Officer Colin Dyer bought 5,000 shares on Wednesday at a weighted average cost of $103.13 and currently owns 49,425 shares. Moreover, Christian Ulbrich, Chief Executive Officer of Europe, Middle East & Africa (EMEA), purchased a 1,000-share block on February 12 for $97.75 each to increase his stake to 26,394 shares.

The commercial real estate services company has seen its shares decline by 34% since the beginning of 2016, presumably because of worries about the state of the commercial real estate market. The recent selloff in commercial mortgage-backed securities (CMBS), which is the longest on record, indicates that the sentiment in the commercial property market is not overly optimistic. The recent widening in CMBS spreads is mainly attributable to the tightening monetary policy pursued by the Fed, although it has been ongoing since last summer. Just recently, Jones Lang LaSalle reported 2015 revenue of $5.97 billion, which was up from $5.43 billion reported for 2014. Meanwhile, the company’s adjusted earnings per share increased to $10.01 from $8.65. It is also important to note that the stock trades at a forward P/E multiple of 9.35, which is below the average of 15.75 for the companies included in the S&P 500 Index. Ken Heebner’s Capital Growth Management reported owning 680,000 shares of Jones Lang LaSalle Inc. (NYSE:JLL) through the latest round of 13F filings.

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