At Tuesday's close, the stock of auto parts retailer Advance Auto Parts (AAP 134.88, +1.89, +1.4%) was down 21.4% in 2017. The latest blow to the stock price came on May 24 after the company reported disappointing first quarter results that included a 2.7% decline in comparable sales. Shares of AAP dropped 5.4% that day. Today, however, they are trading higher on the disclosure that company CEO, Thomas Greco, made a large purchase of the stock following the aforementioned earnings report.
Specifically, a Form 4 Filing made with the SEC indicated Mr. Greco made two stock purchases on May 26.
The first was a direct purchase of 12,400 shares at a weighted average price of $134.34 and the second was a direct purchase of 3,600 shares at a weighted average price of $135.34. In all, Mr. Greco spent approximately $2.15 million on his stock purchases.
Investors like it when insiders make stock purchases, particularly the CEO, who presumably has a better feel than anyone (other than perhaps the CFO) for the company's outlook.
The latter is an important consideration in this instance since concerns are building for the auto parts retailing industry about rising competition from none other than Amazon (AMZN). Those concerns were heightened after Advance Auto Parts, O'Reilly Automotive (ORLY), and AutoZone (AZO) all registered disappointing comparable sales for the March quarter.
Accordingly, Mr. Greco's stock purchase has created a reassuring impression that the long-term earnings prospects for Advance Auto Parts are better than investors had reason to fear following the latest earnings report.
Time and future earnings reports will tell, but in terms of trying to get a feel for why AAP is trading higher today when the broader market is trading lower, it is reasonable to assume that the news of Mr. Greco's stock purchase has acted as a buying catalyst.
As an aside, a separate Form 4 SEC filing revealed that company director, Eugene Lee, Jr., also made a direct purchase of 1,895 shares of AAP stock on May 26 at a weighted average price of $132.18.