Three Stocks Near 52-Week Highs with Strong Insider Selling; Align Technology Inc. (ALGN) Among Them

While it’s quite evident why it does make sense to track insider buying activity, retail investors find it difficult to recognize the usefulness of insider selling. The investment community may be overlooking the significance of insider selling on some occasions. Of course, directors and executives can sell their companies’ shares for a wide number of reasons, which explains investors’ reluctance to pay attention to this kind of activity. Nonetheless, there is some insider selling activity that should catch investors’ attention, which involves voluminous clusters of selling. When three or more corporate insiders unload their companies’ shares, the investment community may wish to sell those shares as well. Ideally, retail investors closely watching insider trading behavior would pair heavy insider selling with a solid bearish investment thesis, so insider trading metrics should definitely play a key role in investors’ stock analysis process. For that reason, the following article will lay out several noteworthy insider sales freshly recorded at three public companies.

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).

Align Technology Had Former President and CEO Unload Sizable Block of Shares This Week

To start with, Align Technology Inc. (NASDAQ:ALGN) had one of its Board members unload a sizable block of shares this week. Board member Thomas M. Prescott, who served as the President and Chief Executive Officer of Align Technology from March 2002 to June 2015, discarded 64,773 shares on Tuesday at prices varying from $74.01 to $74.66 per share, cutting his holding to 111,253 shares.

The shares of the orthodontic-device maker have advanced a whopping 912% in the past ten years and 26% in the past year alone, so it would make perfect sense for Mr. Prescott and other long-term employees at the company to diversify their holdings. In fact, Align Technology Inc. (NASDAQ:ALGN)’s shares are trading near their 52-week high of $75.74 reached last week, so any insider selling at the company would be justifiable. The company’s main pillar of growth relies on the Invisalign System, which provides an efficient approach for treating malocclusion (the misalignment of teeth) based on a custom-made series of plastic removable orthodontic aligners. Malocclusion is one of the most widespread clinical dental conditions, affecting almost one billion people. Considering that Align Technology plans to establish Invisalign clear aligners as the Nr. 1 method for treating malocclusion, there seems to be a massive market potential for the company. The company’s revenues have been growing at solid pace and are anticipated to keep doing so in the upcoming quarters. For instance, Align Technology’s first-quarter revenue grew 20.5% year-on-year to $238.7 million, while second-quarter revenues are anticipated to come in the range of $253.3 million to $258.3 million.

Although Align shares are changing hands at a hefty forward PE multiple of 27.2, which is significantly above the ratio of 18.0 for the Nasdaq 100 Index, the strong growth experienced by the company seems to justify the seemingly high valuation. Columbus Circle Investors, managed by Clifford G. Fox, upped its stake in Align Technology Inc. (NASDAQ:ALGN) by 34% during the March quarter to 1.16 million shares.

Let’s head to the next pages of this article, where we will discuss the insider selling registered at Tanger Factory Outlet Centers Inc. (NYSE:SKT) and Boston Scientific Corporation (NYSE:BSX).

This Pure-Play Outlet Center REIT Had Three Executives Sell Shares This Week

Retail investors looking for clusters of insider selling might want to have a look at the recent insider selling registered at Tanger Factory Outlet Centers Inc. (NYSE:SKT). Lisa J. Morrison, Senior Vice President of Leasing, jettisoned 5,700 shares on Tuesday at an average price of $35.53, reducing her ownership to 38,904 shares. More importantly, Chief Executive Officer Steven B. Tanger sold 20,000 shares on Monday and 65,000 shares on Wednesday at prices that ranged from $35.52 to $36.00 per share, which cut his holding to 817,528 shares. Manuel O. Jessup, Senior Vice President of Human Resources, unloaded 1,000 units of common stock on Monday for $35.50 each, trimming his stake to 22,400 units.

The pure-play outlet center REIT has seen its shares advance 9%, so far in 2016, which are currently chasing their 52-week high of $37.40 reached in mid-April. Tanger Factory Outlet Centers had 33 consolidated outlet centers in 20 states at the end of March, as well as nine unconsolidated outlet centers. The REIT added four new properties during 2015 totaling 1.4 million square feet and plans to open an additional two centers by the end of 2016. The company has been working on revitalizing its center portfolio, as it sold six consolidated centers in 2015 and 2016 that had an average age of 24 years. This reshuffling process may reduce the REIT’s capital spending on restoring older properties.

In April, Tanger Factory Outlet Centers increased its annual dividend by 14% to $1.30 per share, which equates to a current dividend yield of 3.62%. The company has increased its dividend payment each year since going public in 1993. Jeffrey Furber’s AEW Capital Management owns 1.77 million shares of Tanger Factory Outlet Centers Inc. (NYSE:SKT) as of March 31.

Boston Scientific Corporation Registered Increased Insider Selling Amid Strong Performance

Although Boston Scientific Corporation (NYSE:BSX) had three different executives sell shares this week, two of those executives sold shares under pre-arranged trading plans. So let’s have a brief look at the spur-of-the-moment insider selling only. Joseph M. Fitzgerald, Executive Vice President and President of Rhythm Management, unloaded 79,960 shares on Tuesday at prices that fell between $21.80 and $21.84 per share, cutting his direct ownership to 92,020 shares.

The shares of the medical-technology maker recently reached their highest level in ten years, after releasing a stronger-than-expected earnings report. The stock is up 18% year-to-date and trades slightly below its 52-week high of $22.42 reached last week. Boston Scientific Corporation’s net sales for the first quarter increased $196 million, or 11% year-on-year, to $1.96 billion, mainly due to a strong cardiovascular business and the acquisition of the men’s health and prostate health businesses from Endo International plc during the third quarter of 2015. Soon after the release of the first-quarter earnings report, analysts at Jefferies increased the price target on Boston Scientific to $21 from $19 and reiterated the ‘Hold’ rating, saying that “what keeps us at bay is simply valuation; at 18x 2017, shares seem fully valued”. The company also raised its full-year revenue guidance to the range of $8.08 billion-to-$8.23 billion from the previous range of $7.90 billion-to-$8.10 billion.

The number of hedge funds from our system with stakes in the medical-technology maker dropped to 33 from 37 during the December quarter. David Keidan’s Buckingham Capital Management reported ownership of 647,088 shares of Boston Scientific Corporation (NYSE:BSX) through the latest round of 13Fs.

Disclosure: None