Why Are Influential Insiders Snapping Up Shares of These 3 Companies?

Legg Mason Inc. (NYSE:LM) had not witnessed any insider buying since early 2013 until this week. Even more to that, the company had four different insiders purchase shares earlier this week, so let’s try to find out what might have triggered the surge in insider buying at the company. To begin with, Executive Vice President and Chief Financial Officer Peter Nachtwey snapped up 20,000 shares on Tuesday at a cost of $29.92 per share, lifting his overall holding to 109,215 shares. 5,000 shares were purchased by Director John V. Murphy, who currently owns 17,707 shares. The shares were purchased for $29.74 each. John H. Myers, a representative on the company’s Board of Directors, also bought 2,000 shares on Tuesday at a cost of $29.77 per unit and now holds a 15,207-share stake. Last but not least, Chairman, President, and Chief Executive Officer Joseph A. Sullivan acquired 25,000 shares on the same day, at $29.81 apiece, boosting his total stake to 289,989 shares.

The global asset management firm has seen its shares decline by nearly 45% over the past year, presumably because of worsening conditions in the global financial markets. The sharp decline in the company’s share price has made its P/E multiples very appealing, including a forward P/E ratio of only 9.42. As prolonged unfavorable market conditions might result in lower profitability for the company, the exploding insider buying might be perceived as a sign of strong future performance and might be intended to diminish shareholders’ concerns. 33 smart money managers from our system were invested in the company at the end of the third quarter, aggregately accumulating 27.20% of its shares. Andreas Halvorsen’s Viking Global holds a 2.47 million-share position in Legg Mason Inc. (NYSE:LM) as of September 30.

Texas Capital Bancshares Inc. (NASDAQ:TCBI) had one of its most influential insiders purchase shares last week. Chief Executive Officer and President C. Keith Cargill bought a 10,000 share-block on Friday at prices that ranged from $33.43 to $33.67 per share and currently owns a stake of 51,383 units of common stock. The move comes after Texas Capital released its earnings report for fiscal year 2015 last Wednesday. The company reported net income of $144.85 million for the year, up from $136.35 million reported for 2014. Texas Capital’s return on average common equity (ROE) totaled 9.65% in 2015, down from 11.31% reported for 2014. At the same time, the company’s return on average assets (ROA) declined to 0.79% from 1.05%. It is also important to mention the company’s market risk associated with its energy lending activities. Texas Capital has experienced a steady increase in non-performing assets over the past several quarters, which was mainly related to the company’s energy loans.

Texas Capital’s stock has lost 17% over the past year and trades at very attractive P/E multiples at the moment, which includes a forward P/E ratio of 8.63. A total of 15 hedge funds tracked by our team had positions in the company at the end of the July-to-September period, amassing 9.20% of its outstanding common stock. Ken Griffin’s Citadel Advisors LLC reported ownership of 1.10 million shares of Texas Capital Bancshares Inc. (NASDAQ:TCBI) through its 13F for the third quarter.

Disclosure: None