Well-Known Auto Insurer, Successful Furniture Specialist and Leading Engineering Consulting Firm Register Notable Insider Selling

Some studies conclude that companies registering insider buying outperform companies with insider selling, which makes us believe insider selling does convey meaningful information after all. By keeping tabs on insider selling, investors could theoretically avoid investing in risky and poor-performing stocks or cash out at the right time.

There is general consensus that firms and investors benefit from accurate pricing of securities. The “true” or “correct” price of a security should reflect all information related to the security, but outsiders may not have access to each piece of information related to all publicly traded companies. However, corporate insiders, especially top-tier executives, have access to more up-to-date information about their companies’ current operations and future prospects than any analyst, journalist or investor out there. This essentially means that corporate insiders have a good feel for what the “correct” price of a security is. This is the primary reason investors need to closely monitor insider trading metrics. Insider Monkey processed most Form 4 filings submitted with the SEC on Tuesday and identified three companies with noteworthy insider selling.

Through extensive research, we have determined that the due diligence that the investors in our database employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also shown that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).

Nonwarit/Shutterstock.com

Transitioning Auto Insurer Has Board Member Unload Sizable Block of Shares

Progressive Corp (NYSE:PGR) recently registered its most voluminous insider sale of 2016. Board member Bradley T. Sheares offloaded 19,564 shares on Friday at prices ranging from $31.94 to $32.00 per share. After the recent sizable sell-off, Dr. Sheares continues to own 4,964 shares.

The fourth-largest auto insurer in the United States has seen its shares advance a little less than 1% since the beginning of 2016. Progressive Corp (NYSE:PGR) has broadened its offerings by selling home insurance alongside its well-known auto coverage. Precisely, the sustained roll out of its “Platinum” product, which provides a single offering that combines both home insurance and auto insurance, represent the main growth catalyst for the company ahead. The company’s net premiums written increased by 15% year-over-year in the first quarter of 2016 to $5.82 billion, while net premiums earned grew by 14% to $5.32 billion. Net premiums written and earned for the company’s vehicle businesses increased by 11% and 10%, respectively. In mid-May, Progressive also announced that CEO Glenn Renwick was stepping down after being at the helm of the company for more than 15 years and would be replaced by a long-term senior executive, Tricia Griffith.

The auto insurer received some love from the hedge fund vehicles followed by Insider Monkey during the first quarter of 2016, as the number of funds invested in the company climbed to 30 from 23 quarter-over-quarter. Those asset managers stockpiled nearly 4% of the company’s outstanding shares. Andreas Halvorsen’s Viking Global Investors LP acquired a new stake of 1.60 million shares of Progressive Corp (NYSE:PGR) during the March quarter.

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

Strong Performing Furniture Specialist Has Two Executives Offload Shares

La-Z-Boy Incorporated (NYSE:LZB) has seen two executives sell shares in the past two weeks or so. John Douglas Collier, Chief Marketing Officer and Senior Vice President, discarded 15,000 shares on Monday at prices that fell between $26.65 and $27.00 per share, cutting his overall ownership to 81,065 shares. Louis M. Riccio, Chief Financial Officer and Senior Vice President, offloaded 8,000 shares on Thursday at a weighted average price of $28.17, which trimmed his stake to 115,651 shares.

The second-largest manufacturer and distributor of residential furniture in the U.S. has seen its market value jump by 12% since the beginning of 2016. In fact, La-Z-Boy shares are currently trading slightly below their 52-week high of $29.34 reached in mid-October 2015. The recent insider selling comes shortly after La-Z-Boy Incorporated (NYSE:LZB) released its financial results for the fiscal 2016 that ended April 30, which revealed full-year sales of $1.53 billion versus $1.43 billion reported a year ago. The furniture specialist has been busy implementing its 4-4-5 store growth initiative, which involves expanding the company’s La-Z-Boy Furniture Galleries stores network to 400 stores averaging $4 million in sales per store over the five-year period that started with fiscal 2014. The company recently completed the third year of this initiative, which has delivered strong results so far.

La-Z-Boy shares are currently trading at a forward PE multiple of 13.6, notably below the forward PE ratio of 17.0 for the consumer discretionary sector. A total of 21 asset managers from our system had stakes in the furniture specialist at the end of March, which accumulated 6% of the company’s total number of outstanding shares. Adage Capital Management, run by Phillip Gross and Robert Atchinson, owned roughly 857,000 shares of La-Z-Boy Incorporated (NYSE:LZB) on March 31.

Engineering Consulting Firm Has CEO Sell Shares

The man in charge of Exponent Inc. (NASDAQ:EXPO) has been discarding shares consistently over the past several months, so let’s have a look at the most recent insider selling. President and CEO Paul R. Johnston discarded 5,500 shares on Monday for $54.74 each, cutting his ownership to 75,536 shares. Dr. Johnston sold an additional 6,006 shares last Tuesday at $56.31 apiece.

The engineering and scientific consulting firm has seen the value of its shares rise “exponentially” in recent years, with the stock gaining 145% in the past five years and 23% in the past year alone. Hence, Dr. Johnston may be selling shares with the pure purpose of diversifying his holdings. Exponent Inc. (NASDAQ:EXPO) posted revenues of $83.16 million for the first quarter of 2016, up from $80.29 million recorded a year ago. Meanwhile, the company’s first-quarter bottom line grew to $15.35 million from $10.33 million year-over-year. The leading engineering consulting firm enjoyed good demand for its consulting services from a diverse pool of clients for both reactive and proactive projects.

Only ten hedge fund vehicles from our database were invested in Exponent at the end of the first quarter, amassing approximately 5% of the company’s outstanding shares. Given that Exponent’s shares are changing hands at around 28.5-expected earnings, it may be wise for insiders to offload some shares. Jim Simons’ Renaissance Technologies LLC was the owner of 595,400 shares of Exponent Inc. (NASDAQ:EXPO) at the end of March.

Disclosure: None