These Companies’ Insiders Rushed Out To Buy More Shares

It appears that the odds of the Fed raising interest rates at this month’s policy meeting have been reduced to 10%, ‘thanks’ to the weaker-than-expected jobs report released last Friday. Thus, most U.S stocks are bouncing back from the pullback suffered over the past two months. It is worth pointing out that the Standard and Poor’s 500 benchmark has been on an uptrend for the fifth consecutive trading session, which surely brings about optimism among most market participants. Even so, we should not overlook the possibility of more volatility and pain in the weeks ahead considering that the third-quarter earnings season is set to start shortly. In the meantime, some companies have seen strong insider buying lately, which yet again could hint to more optimism in the market. The following article will discuss the insider trading activity at AZZ Inc. (NYSE:AZZ), Celator Pharmaceuticals Inc. (NASDAQ:CPXX), and NuStar Energy L.P. (NYSE:NS). Hence, we will attempt to bring to light potential reasons that might have pushed insiders to buy stock of these companies.

Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. 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. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 118% over the ensuing 36 months, outperforming the S&P 500 Index by nearly 61 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.

To begin with, we will closely examine the insider buys at AZZ Inc. (NYSE:AZZ), a provider of galvanizing services, welding solutions, and specialty electrical equipment to global industrial markets. Paul Wesley Fehlman, who has been serving as Chief Financial Officer, Senior Vice President of Finance and Secretary since May 2014, reported the acquisition of 1,500 shares for $47.30 each last Friday. After the purchase, the executive currently holds a stake of 3,500 shares. At the same time, Chief Executive Officer and President Thomas E. Ferguson acquired 5,000 shares last week at a weighted average price of $47.32. He also received 5,000 shares from the conversion of restricted stock units (RSUs) into common stock, 1,867 of which were disposed of to satisfy tax withholding obligations. Following these transactions, Thomas Ferguson owns 15,633 shares. The AZZ stock has been riding an uptrend since late-January, advancing by over 10% year-to-date. The company’s management anticipates 2016 to be a “solid year”, which might explain the recent insider buying activity. Royce & Associates, founded by Chuck Royce, holds roughly 228,000 shares of AZZ Inc. (NYSE:AZZ) as of June 30.

Let’s now focus our discussion on biopharmaceutical company Celator Pharmaceuticals Inc. (NASDAQ:CPXX). Fred M. Powell, Chief Financial Officer and Vice President, purchased 13,700 shares at a weighted average price of $1.78, enlarging his position to 31,458 shares. A little more than a week ago, Celator Pharmaceuticals released a statement which revealed its positive research and development efforts towards using its proprietary technology to optimize the effectiveness of anticancer drug combinations using molecularly targeted agents. However, analysts believe that there is still a long way to go before Celator Pharmaceuticals and its peers will be able to bring their T-cell therapies to the market. At the same time, a potential investment into the stock may be associated with great risks, given that the company is not generating any revenue, while its losses continue to widen each quarter. Meanwhile, the shares of Celator are 12% in the red year-to-date, so the executive’s move might point to the fact that the potential of the company is not fully priced in. Chao Ku’s Nine Chapters Capital Management is the only investor from our database invested in Celator Pharmaceuticals Inc. (NASDAQ:CPXX).

Finally, NuStar Energy L.P. (NYSE:NS) saw three different insiders acquire shares last week. Mary Rose Brown, Chief Administrative Officer and Executive Vice President since April 2013, purchased 2,332 shares at prices ranging between $42.12 and $43.77, and currently owns 49,344 shares. Moreover, President and CEO Brandley C. Barron added 2,400 shares, acquired at $42.13 apiece, to his holding that is now comprised of 34,153 shares. Lastly, Director Jesse D. Bates reported the acquisition of 1,000 shares at a price of $43.93 per share, all of which were acquired by a trust fund that now owns 20,062 shares. The Director also owns a direct ownership stake of 7,338 shares. The shares of the pipeline operator have had a rough year thus far, declining by over 14% since the beginning of the year. Therefore, it might be the case that the aforementioned Director and executives are buying the shares on weakness. Jim Simons’ Renaissance Technologies is bullish on NuStar Energy L.P. (NYSE:NS), owning slightly more than 165,000 shares.

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