After noting that the CEO at Arrowhead Research bought 16,000 shares yesterday on the open market, several people asked me on twitter if he had previously sold, as the stock is down 75% from its March 6th high of $27.63.
While the overall predictive power of insider's trades are mixed. I am of the opinion that insider's trades are worth a second look if they meet the following criteria:
With this criteria in mind, I dove into the insider transaction data, which I've show all the 2014 activity below.
It appears that Mr. Anzalone has not sold any shares in 2014, and I don't see any shares sold in years past.
However, other insiders seemed to have actively sold shares, by converting their options and selling the proceeds. The best trader among them seem to be the CFO, having sold at $18.77 in February, and $14.02 in August. His gross proceeds from these two sales are $861,150 or net $576,140 when you include the cost of exercising the options.
It is also interesting to note that the CFO and a Director sold on the same day (August 15th) and the CFO got a better price. Perhaps he is a good trader.
Going back to our criteria outlined above:
I would say that the purchase of $101,120 of ARWR stock, of which he already has a very large position, is a meaningful amount, but not tremendously meaningful.
Keep in mind, I am not implying anything improper occurs when insiders sell, rather I believe some insiders are in the position to know the intrinsic value of the company better than other investors, and therefor in a position to buy an undervalued stock and sell an overvalued stock.
Geek note: I am using insider transaction data from OpenInsider.com.
Disclosure, I am long Arrowhead Research.
This is the personal blog of Emory Redd.
This blog is not investment advice. This is not a solicitation to invest. Don't take candy from strangers.
BEST OF HEDGEROLL
ACHILLION AND RA CAPITAL: MY FAVORITE TRADE
SALIX INVESTORS LOOKING FOR A BUYOUT SHOULD BE CAUTIOUS; MORE ACCOUNTING PROBLEMS AHEAD
BIOTECH AS BUFFETT'S WONDERFUL BUSINESS