What Has Insiders at Cisco Systems Inc. (CSCO) And Other Companies Cashing Out Their Holdings?

The Standard & Poor’s 500 Index registered its best trading week in 2015, as the benchmark gained nearly 3.3% last week. Most stock market participants gave a positive response to the increasing likelihood of seeing a rate hike this year, which could suggest that both the Fed and market participants believe in the strength of the U.S economy and the ancillary benefits to it of such a hike. A potential new wave of economic stimulus on the European continent and in Japan may have also diminished some of the fears about a slowing global economy, so it appears that equities are poised to go higher in the weeks ahead. One could expect insider selling activity to explode amid a rally in U.S equities, but statistics reveal that insiders sold less stock last week relative to the previous one. This might point to the fact that insiders do not have doubts about the strength and longevity of last week’s rally. Moving on to the underlying purpose of this daily insider trading article, we will discuss the insider sales registered at three companies and the recent performance of the companies in question.

Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does besides providing high-quality articles. 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 more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 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 begin our discussion by closely examining the insider selling activity observed at Hanover Insurance Group Inc. (NYSE:THG). President and Chief Executive Officer Frederick H. Eppinger sold 100,000 shares on Wednesday at a weighted average sale price of $84.50, cutting his stake to 321,102 shares. The CEO also holds an indirect ownership stake of 200,612 shares via a Rabbi Trust, pursuant to deferral agreements. The provider of various property and casualty insurance products and services recently reported strong third quarter financial results, posting net income of $78.3 million or $1.74 per diluted share, up from $54.9 million or $1.22 per diluted share reported for the same period of last year. Meanwhile, Hanover Insurance Group Inc. (NYSE:THG)’s stock is up by 18% this year, but its trailing price-to-earnings ratio of 11.08 suggests that there is more upside for the stock given the company’s current earnings power. This compares with a 23.12 ratio for the S&P 500 companies. 20 hedge funds observed by Insider Monkey owned the stock at the end of the third quarter, up by four quarter-over-quarter. Lee Munder Capital Group, founded by Lee Munder, owned approximately 504,000 shares of Hanover Insurance Group Inc. (NYSE:THG) as of September 30.

The next page of this article discusses the insider selling at Cisco Systems Inc. (NASDAQ:CSCO) and Regency Centers Corp (NYSE:REG).

Cisco Systems Inc. (NASDAQ:CSCO) was another company that witnessed heavy insider selling activity last week. Mark D. Chandler, Senior Vice President, Legal Services, General Counsel and Secretary, sold 88,331 shares on Wednesday at a weighted average price of $26.87, trimming his stake to 228,959 shares. He also holds an indirect ownership stake of 125,400 shares via a trust fund called Mark Chandler Trust. Several other top executives at the networking giant reported selling shares last week, but those sales were conducted under trading plans, which we don’t cover. On November 20, Cisco revealed its plans to acquire the London-based provider of collaboration infrastructure and conferencing software, Acano Limited, for $700 million in an attempt to strengthen its collaboration business. The company’s switching and routing businesses, which generate most of its revenue, have been losing steam lately, so Cisco is attempting to benefit from the available opportunities in the high-potential collaboration industry. Shares of Cisco Systems are 1% in the red year-to-date and are still trading at an attractive trailing P/E ratio of 14.74, so it is hard to stipulate any firm-specific developments that might have propelled insiders to cash out. The stock lost some of its appeal among the hedge funds tracked by our team, as the number of smart money investors with positions in the company decreased to 67 from 72 during the third quarter. Platinum Asset Management founder Kerr Neilson owned a 9.71 million-share position in Cisco Systems Inc. (NASDAQ:CSCO) on September 30, which represented his second-largest equity holding (read more details).

Last but not least, Regency Centers Corp (NYSE:REG) had one of its top executives sell stock last week. President and Chief Operating Officer Brian M. Smith reported selling 65,578 shares last week at prices between $66.02 and $67.43, cutting his overall holdings to 61,323 shares. Regency Centers Corporation, which began its operations as a real estate investment trust (REIT) in 1993, owns direct or partial interests in 318 shopping centers, most of which are grocery-anchored community and neighborhood centers. The REIT’s business is quite straightforward, as it aims to increase occupancy and rental rates in its existing shopping centers and acquire other shopping centers. Regency plans to maintain an average annual same-property net operating income growth of 3%, which does not seem to justify its high valuation at the moment. The stock is up by 6% for the year and is trading at a rich trailing P/E ratio of 34.47, which is significantly above the average for the S&P 500 companies. Seven hedge funds within our database had positions in the REIT at the end of the September quarter, compared to nine registered at the end of the prior one. Israel Englander’s Millennium Management owns approximately 639,000 shares of Regency Centers Corp (NYSE:REG) as of September 30.

Disclosure: None