The CEO’s of Zendesk Inc. (ZEN) and Oasis Petroleum Inc. (OAS) Discard Shares, Plus Insider Buying at 3 Other Companies

All three major U.S. stock indexes reached all-time highs simultaneously this past week, which should lead to the expectation that the volume of insider selling would reach all-time highs as well. The last time the Dow Jones Industrial Average, Nasdaq and S&P 500 simultaneously closed at new highs was on December 31, 1999. Contrary to what one would anticipate, last week’s dollar volume of insider selling declined relative to the volume of selling registered in the previous week, whereas the volume of insider buying jumped week-over-week. This is great news for the investment community, as corporate insiders keep buying shares even though indexes are trading near record heights.

However, a high portion of insider buying likely occurred at struggling companies that may have disappointed investors with their financial results for the second quarter. After all, corporate insiders usually follow the pattern of buying low and selling high. While board members and executives can sell shares for a wide variety of reasons, they tend to buy shares in their own companies for one simple reason: they believe their companies’ shares are greatly underappreciated. Without further ado, let’s have a look at a set of noteworthy 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).

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Insider Buying at National Security Solutions Provider Despite Soaring Shares

To begin with, two different insiders of Kratos Defense & Security Solutions Inc. (NASDAQ:KTOS) bought shares this past week. William A. Hoglund, Chairman of the company’s Board, snapped up 50,000 shares on Wednesday and two separate batches of 75,000 shares each on Thursday and Friday at prices ranging from $5.55 to $6.00 per share. After the recent purchases, Mr. Hoglund currently owns 400,000 shares. Furthermore, President and Chief Executive Officer Eric M. DeMarco bought 8,904 shares on Tuesday at prices varying from $5.45 to $5.64 per share, lifting his overall holding to 431,070 shares.

Kratos Defense & Security Solutions Inc. (NASDAQ:KTOS) operates as a mid-tier government contractor at the forefront of the Department of Defense’s “Third Offset” strategy, an attempt to create new military capabilities that will counter competitors’ advances in precision weapons, long-range missiles and electronic warfare. The company has seen its market value skyrocket by 56% since the start of the year, but insiders keep buying shares. The company reported revenue of $168.2 million for the second quarter of fiscal year 2016 ended June 26, up by $7.7 million year-over-year. The increase was mainly driven by increased work in its satellite communications, ballistic missile targets, and training businesses. Royce & Associates, founded by Chuck Royce, owns 3.49 million shares of Kratos Defense & Security Solutions Inc. (NASDAQ:KTOS) as of the end of the second quarter.

The second page of this article will list two companies with fresh insider buying, while the final page of the article will discuss noteworthy insider selling registered at two other companies.

Two Insiders of Struggling Take-And-Bake Pizza Company Purchase Shares

Papa Murphy’s Holdings Inc. (NASDAQ:FRSH) was yet another company that had two corporate insiders pile up more shares last week. To start with, Board member L. David Mounts bought 50,000 shares on Wednesday at prices that fell between $5.16 and $5.45 per share, of which 47,000 shares are held in a trust fund that currently holds 90,082 shares. The remaining 3,000 shares are owned by Mr. Mounts’ children. The Board member also holds a direct ownership stake of 7,944 shares. Chief Financial Officer Mark Edward Hutchens acquired 20,000 shares last Monday at a weighted average price of $5.31 per share, lifting his ownership to 26,017 shares.

The franchisor and operator of the Take “N” Bake pizza chain has seen the value of its shares plummet by 46% since the start of 2016. Papa Murphy’s Holdings Inc. (NASDAQ:FRSH) had total revenue of $29.9 million for the three months ended June 27, up by 2.7% year-over-year. However, domestic comparable-store sales decreased by 4.0% year-over-year, reflecting an increasingly competitive landscape, including more aggressive value offerings across pizza and other food service industries, as well as the impact of the company’s efforts to promote online ordering. Archon Capital Management, run by Constantinos J. Chrisofilis, has 407,500 shares of Papa Murphy’s Holdings Inc. (NASDAQ:FRSH) in its portfolio as of June 30.

Notable Insider Buying Registered at Battered Advertising Company

Two members of MDC Partners Inc. (NASDAQ:MDCA)’s executive team purchased shares of their company this past week. Chairman and CEO Scott Kauffman bought 10,000 Class A shares on Friday for $13.27 each, boosting his stake to 340,984 shares. Mitchell S. Gendel, General Counsel and Corporate Secretary, purchased 1,000 Class A shares last Monday at $13.75 apiece. Following the recent purchase, Mr. Gendel currently owns 174,668 Class A shares.

The shares of the advertising and marketing holding company are down by 36% since the start of the year. MDC Partners Inc. (NASDAQ:MDCA)’s discouraging performance predominantly reflects disappointing financial results, an ongoing SEC investigation into founder Miles Nadal’s expenses, and the company’s accounting practices. The owner of ad agencies such as Crispin Porter+Bogusky and 72andSunny recently said its weak second quarter earnings report reflects some pullback from financial services clients and a delay between winning accounts and booking actual revenue. Richard Barrera’s Roystone Capital Partners was the owner of 2.39 million shares of MDC Partners Inc. (NASDAQ:MDCA) at the end June.

The final page of this article will discuss fresh insider selling registered at two other companies.

Customer Service Software Company’s Founder Unloads Shares

Turning our attention to the insider selling arena, the man in charge of Zendesk Inc. (NYSE:ZEN) sold some of his company’s shares this past week. Mikkel Svane, the CEO and founder of Zendesk, discarded 50,000 shares on Thursday and 100,000 shares on Friday at prices ranging from $30.30 to $30.85 per share. After the recent sales, Mr. Svane currently holds an ownership stake of 3.32 million shares.

The software development company that offers an SaaS customer service platform has seen its market cap increase by 15% thus far in 2016. Zendesk Inc. (NYSE:ZEN)’s revenue for the three months ended June 30 was $74.2 million, up by 54% year-over-year. The company derives the majority of its revenue from subscription services, comprised of subscription fees from customer accounts on its customer service platform. The increase in the top-line figure was attributable to the addition of new customer accounts and the sustained expansion of existing customer accounts. Connecticut-based Columbus Circle Investors reported owning 1.25 million shares of Zendesk Inc. (NYSE:ZEN) in its latest 13F filing.

E&P Company’s CEO Offloads Shares

Oasis Petroleum Inc. (NYSE:OAS)‘s most influential and informed executive unloaded shares last week. President and Chief Executive Officer Thomas B. Nusz sold 200,000 shares on Wednesday at prices that ranged from $8.83 to $9.02 per share. Mr. Nusz currently owns 1.59 million shares of Oasis.

The independent exploration and production company, which is focused on the acquisition and development of unconventional oil and natural gas resources mainly in the North Dakota and Montana regions of the Williston Basin, has gained 32% since the start of the year. Oasis Petroleum Inc. (NYSE:OAS)’s total revenue fell by $51.0 million year-over-year to $179.1 million during the second quarter of 2016, mainly reflecting lower realized oil sales prices. There were 29 hedge funds followed by Insider Monkey with stakes in Oasis Petroleum at the end of March, amassing around 34% of the company’s outstanding shares. John Griffin’s Blue Ridge Capital owns 4.55 million shares of Oasis Petroleum Inc. (NYSE:OAS) as of the end of June.

Disclosure: None