Russo Carl: insider trades

Chief executive at Calix, Inc. 25 open-market purchases and no sales not made under a pre-set plan, reported from June 15, 2016 to November 10, 2016.

Would copying Russo Carl’s purchases have beaten the S&P 500?

Buying each purchase the day after it was reported, an equal amount each, and holding it 12 months or until they reported a sale would have turned $10,000 on June 16, 2016 into $11,650 by November 2, 2026, +1.5% a year. The copy held shares only 14% of the time, so the fair comparison is the S&P 500 on those same days with Treasury bills otherwise: $16,329, +4.8% a year (the S&P 500 held throughout made $42,949, +15.1% a year). Beta against the index was 0.06. Twelve months after each report, the average purchase was −33.7% against the S&P 500 (median −35.8%), and 0% beat it: too few years of purchases to tell skill from luck. Measured from the trade date, the insider’s own timing, the average was −33.8%.

With 296 insiders tested, some will look skilled or unskilled by chance alone: when we replaced each insider’s stocks with random companies bought on the same days, about 5.7 cleared the bar ahead and 23.3 behind. One record on its own proves little.

Copying Russo CarlS&P 500, same days investedS&P 500, held throughout $10,000 copying Russo Carl’s open-market purchases from June 16, 2016, before costs and taxes, marked weekly. Each purchase gets the same starting stake, bought at the close of the first trading day after the report and sold 12 months later or the day after a reported sale of that stock; uninvested money earns the Treasury bill rate. “Same days invested” holds the S&P 500 only on the days the copy held shares, Treasury bills otherwise.

Return a year, copying: +1.5%
S&P 500, same days invested: +4.8% (held throughout +15.1%)
Time in shares: 14%
Sharpe ratio (S&P 500): 0.02 (0.74)
Biggest drop (S&P 500): −43% (−34%)
Market sensitivity (beta): 0.06
Purchases copied: 25

Trade by trade

Russo Carl: trades against the S&P 500 afterwards
Measured	Trades counted	Average vs S&P 500	Median	Went the right way	Years	t-statistic	p-value	Evidence
Purchases, 3 months after the report	25	−1.4%	−1.7%	40%	1	—	—	Not enough years
Purchases, 6 months after the report	25	−8.8%	−8.9%	16%	1	—	—	Not enough years
Purchases, 12 months after the report	25	−33.7%	−35.8%	0%	1	—	—	Not enough years
Purchases, 12 months after the trade	25	−33.8%	−37.3%	0%	1	—	—	Not enough years
Sales, 3 months after the report	0	—	—	—	—	—	—	Not enough years
Sales, 12 months after the report	0	—	—	—	—	—	—	Not enough years
Sales, 12 months after the trade	0	—	—	—	—	—	—	Not enough years

“Average vs S&P 500” is the stock’s return including dividends minus the index’s over the same dates, from the close on the first trading day after the report, or from the close on the trade date. Only windows that have finished are counted. For sales, a negative figure means the stock lagged after it was sold, so selling was the right call (green). “Went the right way” is the share of purchases that beat the index, or of sales that trailed it. The t-statistic uses one average per year of reports, because one person’s trades bunch into the same stock and weeks, and needs trades in at least four different years; the p-value comes from the t distribution with that number of years (with four years, a t of 2 has p = 0.14). “Some evidence” means p under 5%, “strong evidence” p under 1% over at least six years.

Companies traded

Company	Title on the latest filing	Purchases	Sales	First report	Latest report
Calix, Inc CALX	President & CEO	25	0	June 15, 2016	November 10, 2016

Trades and what followed

Moves are against the S&P 500; green means the trade went the insider’s way.

Reported	Traded	Company	Trade	Value	3 months after report	12 months after report	12 months after trade
November 10, 2016	November 8, 2016	CALX	Purchase	$17,822	−9.3%	−38.7%	−40.9%
November 8, 2016	November 4, 2016	CALX	Purchase	$20,055	−4.1%	−34.3%	−43.3%
November 3, 2016	November 2, 2016	CALX	Purchase	$20,295	−4.4%	−43.3%	−44.1%
November 1, 2016	October 31, 2016	CALX	Purchase	$19,185	−1.7%	−44.1%	−35.4%
October 28, 2016	October 27, 2016	CALX	Purchase	$19,275	+6.7%	−35.4%	−37.6%
October 27, 2016	October 25, 2016	CALX	Purchase	$19,995	+4.8%	−38.9%	−38.3%
October 25, 2016	October 21, 2016	CALX	Purchase	$20,025	+4.8%	−36.2%	−37.3%
October 21, 2016	October 19, 2016	CALX	Purchase	$20,265	+0.7%	−39.7%	−42.1%
October 19, 2016	October 17, 2016	CALX	Purchase	$19,965	−2.7%	−38.2%	−35.8%
October 14, 2016	October 13, 2016	CALX	Purchase	$20,775	−1.2%	−35.8%	−40.7%
October 13, 2016	October 11, 2016	CALX	Purchase	$20,910	−3.4%	−37.4%	−43.6%
September 26, 2016	September 22, 2016	CALX	Purchase	$20,745	+1.1%	−48.6%	−46.1%
September 22, 2016	September 20, 2016	CALX	Purchase	$20,895	+5.7%	−47.9%	−50.5%
September 19, 2016	September 16, 2016	CALX	Purchase	$20,955	+6.7%	−50.5%	−49.2%
September 15, 2016	September 13, 2016	CALX	Purchase	$10,485	+6.2%	−49.2%	−50.8%
July 22, 2016	July 20, 2016	CALX	Purchase	$23,381	−14.8%	−28.8%	−28.3%
July 19, 2016	July 15, 2016	CALX	Purchase	$33,975	−14.2%	−28.3%	−25.4%
July 14, 2016	July 12, 2016	CALX	Purchase	$34,125	−8.3%	−25.4%	−26.2%
July 11, 2016	July 7, 2016	CALX	Purchase	$32,865	−5.3%	−26.2%	−20.2%
July 6, 2016	July 1, 2016	CALX	Purchase	$31,350	+0.3%	−20.2%	−20.5%
June 30, 2016	June 29, 2016	CALX	Purchase	$20,040	0.0%	−20.5%	−16.9%
June 28, 2016	June 24, 2016	CALX	Purchase	$30,210	+8.3%	−16.9%	−19.8%
June 23, 2016	June 21, 2016	CALX	Purchase	$31,830	−3.5%	−19.8%	−21.3%
June 20, 2016	June 16, 2016	CALX	Purchase	$31,650	−4.6%	−21.3%	−16.9%
June 15, 2016	June 13, 2016	CALX	Purchase	$30,600	−2.9%	−16.9%	−14.9%

Open-market purchases and sales of at least $10,000 in companies we cover, from SEC Form 4 filings; sales made under a pre-set Rule 10b5-1 plan are not shown. “Not yet” means the window has not finished or the share price was under $5 at entry. These are the shares’ moves after each trade: they say nothing about why Russo Carl traded and do not suggest the use of non-public information. How every insider compares · the insider trading backtest.