What Has Insiders Cash Out at These Three Strong-Performing Companies? Activision Blizzard Inc. (ATVI) Among Them

Insider trading watchers might have already noticed that the volume of insider trading activity has been gaining pace over the past few weeks, after a relatively long period of silent trading. Statistics reveal that insider selling has been significantly more pronounced than insider buying over the past few months. At the same time, the windows for insiders to buy and sell shares seem to be widely opened at the moment, and the fact that insiders have been consistently unloading their holdings makes each insider sale really hard to interpret. With this in mind, this article will disclose the insider selling activity at three companies and will also discuss the performance of these companies in the last several months.

Barone Firenze / Shutterstock.com

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.

We will start off our discussion with Fabrinet (NYSE:FN), which has seen several top executives unload shares recently. Toh-Seng Ng, Chief Financial Officer since March 2012, sold 53,266 shares on Friday at a weighted average price of $23.05, cutting down his stake to 124,913 shares. President and Chief Operating Officer Harpal S. Gill offloaded 28,370 shares on Friday and 3,548 shares on Monday at prices in the range of $23.00-to-$23.07 per share. After these transactions, the COO currently owns a 208,611-share stake valued at $4.72 million. The provider of electronics-manufacturing services has seen its shares gain 27% this year, but analysts seem to suggest that they have even more upside potential. Specifically, Fabrinet (NYSE:FN)’s stock is currently trading at a forward P/E ratio of 11.03, compared with 17.65 for the S&P 500 Index. This means that either analysts have too high expectations on the company’s earnings potential, or the market greatly undervalues the stock at the moment. Meanwhile, the count of hedge funds tracked by Insider Monkey with positions in the company climbed to 13 from 11 during the second quarter, aggregately accumulating 17.60% of the company’s outstanding shares. Royce & Associates, founded by Chuck Royce, held a 3.94 million-share stake in Fabrinet (NYSE:FN) at the end of that quarter.

The next page discusses the insider selling activity at Activision Blizzard Inc. (NASDAQ:ATVI) and Ralph Lauren Corp (NYSE:RL).

Let’s now turn our full attention to an insider sale registered at video game giant Activision Blizzard Inc. (NASDAQ:ATVI). Chief Customer Officer Brian Hodous reported selling 15,996 shares on Thursday at a weighted average sale price of $37.50, truncating his ownership to 122,630 shares. It is also worth pointing out that 48,508 of these shares represent restricted stock units with vesting criteria tied to performance. The shares of Activision Blizzard have been riding a steady uptrend since the beginning of the year, advancing nearly 69% year-to-date. If looking at some broad and simple valuation metrics, one can conclude that the stock is fairly valued at the moment and there is not much upside in the upcoming future. For instance, the stock is currently trading at a trailing P/E ratio of 23.16, which compares to a ratio of 23.41 for the S&P 500. This Friday, the world’s fifth-largest video game maker announced the launch of its film and television studio to show its globally-recognized titles on screens. The stock received some attention from the hedge funds monitored by our team during the second quarter, as the number of top money managers invested in the company increased to 46 from 41 quarter-over-quarter. Ken Griffin’s Citadel Investment Group was among the top equity holders of Activision Blizzard Inc. (NASDAQ:ATVI) with 5.02 million shares as of the end of June.

Last but not least, Ralph Lauren Corp (NYSE:RL) saw two of its top executives offload their holdings last week. President and Chief Operating Officer Jackwyn Nemerov sold out her entire 44,773-share stake on Friday at prices in the range of $132.64-to-$136.69. Furthermore, Christopher H. Peterson, President of Global Brands at Ralph Lauren, sold 3,016 shares on the same day at a weighted average price of $136.38, cutting his stake to 1,508 shares. The shares of the upscale clothing company surged on the announcement of its fiscal second-quarter earnings report, which was released on November 5. Even so, the stock is still 27% in the red year-to-date, while its trailing and forward P/E ratios seem to suggest that Ralph Lauren’s stock is quite fairly valued at the moment. Specifically, the shares are trading at a trailing P/E ratio of 20.93 and a forward P/E of 17.47, which points to the fact that the upside is quite limited. Meanwhile, Ralph Lauren lost some of its charm within the hedge fund industry, as the number of hedge funds with positions in the company dropped to 28 from 35 during the second quarter. Cliff Asness’ AQR Capital Management owned roughly 847,000 shares in Ralph Lauren Corp (NYSE:RL) at the end of the June quarter.

Disclosure: None