What Triggered The Strong Insider Selling At These 3 Companies?

Many tend to believe that tracking insider trading activity should be part of a broader process used to examine investing opportunities in stocks. At the same time, it would be unwise to claim that insider selling should always be interpreted as a bearish sign. Nonetheless, this type of insider trading activity can provide some insights about how insiders feel about their companies’ future prospects and the resultant stock performance of their companies. Reputable professor and researcher in the field of insider trading Nejat Seyhun has provided evidence that when executives sell shares, their companies’ stock underperformed the market by approximately 5.4% over the next one-year period. Of course, that does not mean that one can beat the market by blindly mimicking executives’ trades, but this definitely indicates the usefulness of monitoring insider trading activity. Having this in mind, in the following article we will discuss the insider selling activity at three companies. We will also attempt to find out whether the trades of these companies’ insiders are somewhat linked to any firm-specific issues.

Prior to discussing the insider trading activity at those three companies, let us make you familiar with what Insider Monkey can offer. 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 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.

PrivateBancorp Inc. (NASDAQ:PVTB) has seen strong insider selling activity over the past few months, whereas insider buying has been non-existent since the end of 2012. However, we will be focusing only on the insider trades that have occurred over the past week or so. Director Ralph B. Mandell, who is Chairman Emeritus and co-founder of PrivateBancorp, unloaded 15,000 shares on Monday at a weighted average sale price of $40.26. After the recent transaction, the Director holds 438,217 shares. Furthermore, C. Brant Ahrens, Executive Managing Director and President of Personal Client Services for The PrivateBank, sold 1,253 shares on Friday at prices in the range of $40.28-to-$40.31, trimming his stake to 51,519 shares. These transactions come after PrivateBancorp Inc. (NASDAQ:PVTB) released stronger-than-expected financial results for the third quarter on October 13. Meanwhile, the stock has advanced by more than 20% since the beginning of the year, so the Director might have decided to cash out a portion of his holdings given the current share price. Within our extensive database of elite hedge funds, Donald Chiboucis’ Columbus Circle Investors is one of the top shareholders of PrivateBancorp Inc. (NASDAQ:PVTB) with 2.03 million shares as of June 30.

The next page discusses the insider selling activity at two other companies.

Let’s now take a look at the insider selling activity at energy company Public Service Enterprise Group Inc. (NYSE:PEG). Ralph A. LaRossa, President and Chief Operating Officer of Public Service Electric and Gas Company, offloaded 19,217 shares on Thursday through multiple transactions at prices ranging from $42.60-to-$43.39. After the recent sales, the executive currently holds a stake of 97,889 shares. The shares of the energy company have recovered from the August sell-off, advancing by over 12% since the beginning of September. On October 14, PSEG Solar Source, a subsidiary of PSEG Power (a merchant power generation company part of the Public Service Enterprise Group family of companies), announced the completion of the PSEG Waldorf Solar Energy Center’s construction. The freshly-built facility has a capacity of 13.1 MW-dx and increases the capacity of PSEG Solar Source’s portfolio to 148 MW-dc. To sum up, it would be faulty to link the executive’s move to any firm-specific issues, but the sharp rally of the stock since the beginning of September might serve as a potential explanation. Cliff Asness’ AQR Capital Management reported owning 5.88 million shares in Public Service Enterprise Group Inc. (NYSE:PEG) through its 13F filing for the June quarter.

Finally, U.S-based furniture company Steelcase Inc. (NYSE:SCS) saw two insiders sell stock last week. Lizbeth S. O’Shaughnessy, Senior Vice President, Chief Administrative Officer, General Counsel and Secretary, sold 40,000 shares on Friday at a weighted average sale price of $19.67. She currently holds a 160,280-share stake valued at $3.19 million. Additionally, David C. Sylvester, who has been serving as Chief Financial Officer since October 2006 and Senior Vice President since April 2011, sold 15,700 shares last Monday at prices ranging from $19.68-to-$19.72, reducing his stake to 293,278 shares. The shares of the furniture company have been on an uptrend since late-August, generating a year-to-date return of nearly 11%, excluding dividends. Steelcase Inc. (NYSE:SCS) anticipates its third quarter revenue to be in the range of $800 million-to-$820 million, which yields a revenue growth rate of 3%-to-5% year-over-year. It seems that the strengthening U.S economy and the tightening labor market contributed to the company’s increased orders in the second quarter, so it remains to be seen what the company discloses in the upcoming third quarter earnings report. Robert Polak’s Anchor Bolt Capital acquired a 500,000-share stake in Steelcase Inc. (NYSE:SCS) during the June quarter.

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