Well-Known Rent-A-Center Inc. (RCII) and Two Other Companies Highlight Recent Insider Buying Activity

Numerous studies conducted by reputable researchers and professors conclude that non-insiders can generate good trading profits by tracking insider trading activity. Although some studies may be considered somewhat outdated, the reason behind tracking insider trading metrics remains as strong and durable today. As well-known investment guru Peter Lynch once said: “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise”. This rule of thumb continues to apply today, as it is highly unlikely that corporate insiders would invest capital into their own companies’ stock unless they anticipate stock price appreciation.

Meanwhile, one can make a laundry list of reasons corporate insiders are selling shares of their companies, so most retail investors tend to pay little attention to insider selling. Moreover, past research shows that there is greater correlation between stock performance and insider buying, as opposed to insider selling. Nonetheless, Insider Monkey does not recommend investors to blindly mimic each insider purchase just because past research shows that this approach is profitable. It would be wiser for investors to incorporate insider trading metrics as part of their broader security and selection process, a practice used by several hedge fund vehicles monitored by our team. That said, this insider trading article will lay out a list of three companies that witnessed noteworthy insider buying over the past several trading sessions.

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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Uniform and Image Apparel Company Sees CEO Pile up Some Shares

According to our insider trading database, Superior Uniform Group Inc. (NASDAQ:SGC) recently registered the first insider purchase of this year. Chief Executive Officer Michael L. Benstock purchased 7,000 shares on Friday at prices ranging from $16.00 to $16.01 per share. After the recent purchase, Mr. Benstock currently owns 488,193 shares.

The insider purchase comes a few weeks after the uniform and image apparel company released a seemingly disappointing second-quarter earnings report. Superior Uniform Group Inc. (NASDAQ:SGC) reported net sales of $64.66 million for the quarter, up 19.5% year-over-year. The increase was mainly driven by the acquisition of California-based full-service merchandise sourcing and promotional products company called BAMKO Inc., completed in early March. Net sales in the company’s uniforms segment leveled off in the second quarter after an exceptionally strong first quarter, which appears to have been the primary source of disappointment for investors. Superior Uniform’s net income decreased to $3.08 million from $3.62 million reported for the second quarter of 2015. Superior Uniform’s shares are 4% in the red thus far in 2016 after plunging by 10% in the past month alone.

A mere two funds followed by Insider Monkey were invested in the uniform and image apparel company at the end of the March quarter. Jim Simons’ Renaissance Technologies LLC was one of the two hedge funds invested in Superior Uniform Group Inc. (NASDAQ:SGC), owning 209,000 shares as of March 31.

Let’s head to the second page of this article, where we will reveal fresh insider buying registered at two other companies.

The CEO of a Leading Rent-to-Own Company Purchases Some Shares

The man at the helm of Rent-A-Center Inc. (NASDAQ:RCII) purchased a sizable block of shares earlier this week. CEO Robert D. Davis snapped up 10,000 shares on Monday at a price tag of $10.87 each. Following this relatively sizable purchase, Mr. Davis currently holds an ownership stake of 131,850 shares.

The furniture and electronics rent-to-own company has lost roughly 28% of its market value since the beginning of 2016, as the company’s same store revenue has been impacted by the rollout of a new point-of-sale system, the ongoing recast of the smartphone category, sustained declines in the computer and tablet category, as well as further deterioration in oil affected markets. Rent-A-Center Inc. (NASDAQ:RCII), considered the nation’s largest rent-to-own company, reported total store revenue of $743.44 million for the second quarter, which decreased 8.3% year-on-year. Revenues in the company’s Core U.S. segment, which consists of company-owned rent-to-own stores in the U.S., Canada and Puerto Rico, decreased due the continued rationalization of its store base, as well as a 6.7% decreased in same store revenues. More importantly, the weak second-quarter earnings report forced Rent-A-Center to revise its full-year outlook. The company currently anticipates core revenue to decline in the range of 8.5%-to-11.5%, roughly double what the management previously anticipated. Core same store sales are expected to drop in the range of 5%-to-8%.

There were 21 asset managers from our database with long position in the rent-to-own company at the end of the first quarter, which aggregately amassed roughly 15% of the company’s total number of outstanding shares. Radix Partners LLC, run by Joshua Packwood and Schuster Tanger, cut its stake in Rent-A-Center Inc. (NASDAQ:RCII) by 17% during the June quarter to 28,381 shares.

Low-Priced Bank Holding Company Registers Insider Buying

Porter Bancorp Inc. (NASDAQ:PBIB) was yet another company that witnessed insider buying earlier this week. Board member Norman Marcus Satterthwaite bought 10,000 shares on Monday at $1.65 apiece, lifting his ownership to 144,809 shares.

Porter Bancorp is a Kentucky-based bank holding company for PBI Bank, the tenth-largest bank domiciled in the Commonwealth of Kentucky based on assets. The bank made significant progress in reducing its net-performing assets in the first half of 2016, as non-performing assets were reduced by $5.1 million in the second quarter after achieving reductions of $4.3 million in the first quarter. Non-performing assets decreased to $23.9 million or 2.61% of total assets on June 30 from 3.09% of total assets recorded at the end of March and 7.13% of total assets at the end of June 2015. Moreover, Porter Bancorp Inc. (NASDAQ:PBIB) reported net income of $979,000 for the second quarter, as compared with a net loss of $2.0 million posted for the second quarter of the prior year.

Porter Bancorp’s shares have gained 13% since the beginning of 2016. George Hall’s Clinton Group was the owner of 360,900 shares of Porter Bancorp Inc. (NASDAQ:PBIB) at the end of the first quarter.

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