Two Energy-Related Companies And One MOB-focused REIT Witness Heavy Insider Selling

Most analysts and traders are bullish on the stock market for 2016, but there are several nuances that point to grim prospects in the upcoming years. The rising-interest-rate environment, which may result in a stronger U.S. dollar, and a weakening global economy will most likely put more weight on earnings. The fourth-quarter earnings for the companies included in the S&P 500 are anticipated to decline by 4.9% year-on-year, which could mark the third consecutive quarterly earnings decline. Leaving the macroeconomic issues aside, numerous insiders have been selling their companies’ stock recently, which might scare off certain risk-averse investors. Of course, corporate insiders can cash out their holdings for a wide array of reasons that are not necessarily related to their companies’ current challenges or future developments, but this type of activity still represents an important aspect individual investors should take into account when analyzing a potential investment. With this in mind, the following article will discuss the insider selling reported at three companies and the recent performance of these companies.

Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does. 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 kick off our discussion by looking into the insider trading activity witnessed at FMC Technologies Inc. (NYSE:FTI). Executive Vice President and Chief Financial Officer Maryann T. Seaman offloaded 8,500 shares on Wednesday at a price of $29.5 per unit, trimming his overall holding to 268,636 shares. The provider of technology solutions for the energy industry has seen its shares decline by over 33% since early 2015. The stock appears to be trading at an attractive trailing price-to-earnings ratio of 13.53 (this compares with the P/E ratio of 22.95 for the S&P 500 Index), but this valuation metric does not reflect the impact of the sustained oil-supply glut on the company’s future earnings. Numerous crude oil development prospects have been postponed due to the low crude oil price environment, which has in turn affected the demand for FMC Technologies Inc. (NYSE:FTI)’s products and services. Meanwhile, the depressed energy prices are believed to boost consolidation within the oil services industry, primarily because companies seek to strengthen their balance sheets and enhance bottom-lines as a result of synergies. Reportedly, a French oilfield services company called Technip has been in discussions with FMC Technologies about a potential combination. Ken Griffin’s Citadel Advisors LLC cut its stake in FMC Technologies Inc. (NYSE:FTI) by 12% during the July-to-September period, ending the quarter with 6.36 million shares.

The second page of this article reveals the insider sales reported at Oasis Petroleum Inc. (NYSE:OAS) and Healthcare Trust Of America Inc. (NYSE:HTA).

Oasis Petroleum Inc. (NYSE:OAS) saw a high-ranking insider sell stock in the past two weeks. Chairman and Chief Executive Officer Thomas B. Nusz unloaded 200,000 shares on December 23 at prices that ranged from $7.71 to $7.90 per share and currently owns 1.51 million shares. It should be mentioned that the CEO has been gradually cashing out since mid-2015, while the company’s shares have been sliding along the way. In fact, the stock has lost 48% over the past one-year period and appears to be in a bottoming-out phase at the moment. But it all depends on where crude oil prices are headed. This independent exploration and production company mainly operates unconventional oil and natural gas resources in the North Dakota and Montana regions of the Williston Basin. The company’s total revenues for the nine months that ended September 30 totaled $607.67 million, down from $1.09 billion reported for the same period a year ago. Oasis Petroleum believes that it has enough liquidity to cover its anticipated 2016 capital expenditures and meet its near-term future obligations, so bottom fishing investors might consider this company as a potential bet on the crude oil industry rebound. A total number of 26 hedge funds from our database had stakes in the company at the end of the third quarter, accumulating 34.50% of its outstanding shares. Billionaire John Paulson’s Paulson & Co. trimmed its stake in Oasis Petroleum Inc. (NYSE:OAS) by 6% during the third quarter to 8.27 million shares.

Healthcare Trust Of America Inc. (NYSE:HTA) also had one of its top executives selling big around two weeks ago. President and Chief Executive Officer Scott D. Peters sold a 50,000-share block on December 23 at a weighted average price of $26.95 and currently owns 421,849 shares. This publicly-traded REIT that focuses on medical office buildings (MOBs) has seen its stock drop 7% over the past year, but the stock has been on an uptrend since mid-September. The company reported net income of $23.0 million for the first nine months of 2015, down from $24.5 million reported a year ago. Even so, reputable financial hubs believe that medical office buildings have the most appealing fundamentals across the healthcare REIT space. Stifel’s analyst Chad Vanacore recently reiterated the ‘Buy’ rating on the stock and raised the price target to $29 from $28, citing low exposure to oversupply risks (relative to senior housing) and high protection from direct government reimbursement risk (relative to skilled nursing and hospitals). The analyst believes that MOB-focused REITs are poised to outperform the healthcare REIT sector in 2016, so it remains to see whether the CEO cashed out at the right time. The number of hedge funds from our database with positions in the REIT climbed to 12 from nine during the third quarter, while Jacob Gottlieb’s Visium Asset Management upped its position in Healthcare Trust Of America Inc. (NYSE:HTA) by 11% during the quarter to 3.18 million shares.

Disclosure: None