U.S. small-cap stocks are off to a great year. A sharp economic recovery combined with bullish, "risk-on" market sentiment has been the perfect storm for small-cap outperformance in 2021. Up nearly 22% year-to-date, the S&P 600 small cap index is outpacing its large cap S&P 500 counterpart by about 9%.
Many small-cap companies have seen their stock price come along for the ride. A lot are trading near all-time highs. Are small cap investors better off holding for more gains or taking profits?
One place to turn to for guidance is insider selling activity. Sale transactions placed by corporate insiders can be a valuable signal of what may be ahead.
Let's take a look at three small-cap stocks that insiders have been selling as they have approached record levels.
Why is Peabody Energy Stock Slumping?
At last week's peak Peabody Energy (NYSE:BTU) shares were up more than 300% year-to-date. The coal miner is benefitting from a surge in coal prices that is ironically tied to prospects for clean energy. Investors expecting coal mining projects and thereby coal supply to diminish as the world pushes towards a carbonless future have bid up Peabody shares with elevated commodity pricing in mind.
Meanwhile, Peabody insiders have been selling in recent weeks to capitalize on their stock's unlikely ascent. President of U.S. Operations Kemal Williams sold $429,000 worth of the stock on May 18th stoking a six-day slide. After it recovered, he sold another $80,325 on June 11th at $2-plus per share more. These sells trimmed his holding by 27%.
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That's quite a statement by an insider and one the market has taken note of. Since the more recent sell, Peabody Energy has gone on another 6-day slide. Slipping coal prices and executive selling has this stock running out of steam.
Is Tenneco's Largest Shareholder Selling?
Auto parts company Tenneco (NYSE:TEN) has finally gone into overdrive this year after four straight down years from 2017 to 2020. It has benefitted from increased demand for clean air systems tied to the emission reduction goals of its global customer base. Last week Tenneco stock climbed to a new 52-week high making the stock a 2021 double.
If you're an astute legendary investor like Carl Ichan, what do you do in this situation? You take profits. That's exactly what Mr. Icahn has been up to.
He initiated a 5.65 million share position back in 2018 when Tenneco was on its way to revisiting its 2009 low. After the onset of the pandemic dragged the stock to down in the second quarter of last year, he added another 3.48 million shares to his portfolio.
As Tenneco recovered from an April low around $2 per share. Mr. Icahn began unwinding the position. In the last three months alone, he has singlehandedly been responsible for approximately $67 million of sales. Roughly half of that selling was done early last month when the stock was trading in the $11 to $14 range.
With Tenneco now trading above $20 for the first time in two years, it wouldn't be surprising to see Mr. Icahn sell more. He is still the largest shareholder with a roughly 11% stake so his next moves will be closely watched by the market.
Are Insiders Selling HyreCar Stock?
HyreCar (NASDAQ:HYRE) is a lesser-known small-cap having only traded on the Nasdaq for about three years. It may not fly under the radar for much longer after surging 171% last year and another 203% year-to-date. The company is driving the ride-hailing and food delivery wave but in a different way.
That's because HyreCar sells and rents out cars that workers use for their Uber, Lyft, and Door Dash side hustles. The unusual on-demand car rental business is gaining traction in the market largely because the supply of new and used vehicles is so limited these days due to pandemic headwinds. Car owners also like the service because they can rent out their vehicles to earn passive income.
As HyreCar shareholders have enjoyed the ride, insiders have been cashing out. In the past month, two executives and a board member have pressed the sell button. First Chief Operating Officer (COO) Henry Park sold 35,000 shares of his roughly 200,000 share position. Then, CFO Scott Brogi sold more than $1.2 million worth of HyreCar trimming his holdings by about one-third. Director Grace Wang followed by selling nearly $900,000 of HyreCar.
HyreCar's stock has held up remarkably well despite the recent insider selling. It is still benefitting from a strong first quarter earnings report that highlighted the rise in demand from drivers. The massive volume spike on this day certainly foreshadowed a prolonged rally.
With HyreCar closing in on a fresh record high, it'll be interesting to see if insiders continue to get off the ride.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| HyreCar (HYRE) | $0.00 | -100.0% | N/A | -0.02 | N/A | N/A |
| Tenneco (TEN) | $20.23 | -3.7% | 5.93% | 3.59 | Buy | $24.00 |
| Peabody Energy (BTU) | $26.74 | -1.1% | 1.12% | 7.07 | Moderate Buy | $30.00 |
