Top 10 CFO Insider Stocks Ranked By 6 Quantitative Models For May

by: JD Henning

A sample of the top 10 out of 33 stocks with the largest CFO insider purchases through May are analyzed and ranked across 6 quantitative models.

Stocks are ranked based on value, forensic, and momentum criteria to see if enhanced stock performance is generated by combining algorithms and anomalies.

The quantitative models include: Piotroski, Graham enhancement, Beneish M-Score, Altman Z-Score, Ohlson O-Score, and Bounce/Lag Momentum Score.

This ad hoc study may reveal over time which set of models may forecast the best future performance of CFO insider purchases.


Out of the curiosity that continues to drives my research, I have decided to combine six top quantitative models tested in other research portfolios in order to rank 33 of the largest CFO insider purchases through May. This article provides a sample of the top 10 ranked insider purchases.

These top 10 stocks are among the largest CFO insider purchases from April 1 through May 14 with a minimum purchase of $20,000 according to SEC Form 4 records. A point is awarded for each positive condition across six different value, forensic, and momentum models and the ranking starts with the stocks receiving the most positive points to a maximum value of six.

Readers are encouraged to weight the models according to their own preferences of momentum (better for timing), value (better for long term growth), and forensic (better to avoid bankruptcy risk or financial manipulation) criteria. For the purposes of this simple study, each model is weighted equally and the stocks are ranked in descending order from the highest (most positive scores) to the lowest (fewest positive scores).

CFO Insider Trade Rankings [R] through May 14

Name CFO purchase amount R Piotroski score Price/ Graham number Beneish M-Score Altman Z- Score Ohlson O-Score



Compass Minerals International Inc. (CMP) $36,019 5 5.43 4.29 -2.62 2.01 14.04% 0.069
Brigham Minerals Inc. (MNRL) $349,992 5 5.48 0.59 -3.39 2.34 2.17% 0.646
The Mosaic Company (MOS) $100,300 5 7.44 0.72 -2.89 2.04 7.91% 0
Tilly's Inc. (TLYS) $52,145 5 6.46 1.18 -2.97 4.52 2.24% 0.007
Tradeweb Markets Inc. (TW) $216,000 5 5.38 6.8 -2.29 15.36 0.69% 1.761
Archer-Daniels-Midland Company (ADM) $256,560 4 4.4 1.07 -2.56 3.11 3.34% 0.009
Allison Transmission Holdings Inc. (ALSN) $230,000 4 9.51 poor -2.69 2.09 18.13% 0.041
Affiliated Managers Group Inc. (AMG) $1,025,090 4 5.43 1.48 -2.04 2.12 2.06% 0.002
Apogee Enterprises Inc. (APOG) $56,200 4 6.4 2.18 -2.49 3.3 6.21% 0.104
Hanesbrands Inc. (HBI) $175,600 4 8.46 poor -2.68 2.27 15.13% 0.058


The methodology for this unique study combining the CFO Insider Trading anomaly with 6 different fundamental value, forensic, and momentum quantitative models is as follows.

1. The largest CFO insider purchases from April 1 through May 14 with greater than $20,000 transactions were selected for screening across 6 different quantitative models. Part of this informal test was to see if the large CFO transactions showed any objective patterns of purchasing in disproportionately strong value, forensic, or momentum models. The anomaly showed strong results through April and remains significant through May as well.

CFO Insider Trading Anomaly: April Results +4.53%

Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise" - Peter Lynch

2. The Piotroski Value score was then applied with positive scores given to stocks with 5 or higher values on the scale from 0 to 9.9. The Score consists of aggregating nine individual binary signals derived from accounting variables related to profitability. Retests of the Piotroski model continue to outperform all other top value algorithm models as most recently shown in the financial literature according to Amor-Tapia, B. & Tascón, M.T. (2016).

Top Piotroski-Graham Value Stocks For May 2019

The valuation of these firms focuses on accounting fundamentals such as leverage, liquidity, profitability trends, and cash flow adequacy" - Joseph Piotroski

3. The Price/Graham Number was then applied with positive scores given to stocks with a value of 1.5 or below. Benjamin Graham, often called "the Father of Value Investing", first leveraged key financial ratios to identify undervalued companies with strong growth potential. The Graham Number value score results from a formula developed by Benjamin Graham that is based on his assessment that good value stocks should have a P/E ratio below 15 and a P/B ratio below 1.5.

Top Piotroski-Graham Value Stocks For May 2019

4. Forensic Tests using the Beneish M-Score, the Altman Z-Score, and the Ohlson O-probability Score were then applied with positive scores given according to each model parameters. M-Scores less than -2.22 were given positive scores as low risk of earnings manipulation. Z-Scores above 1.88 were given positive scores as low risk of bankruptcy within 2 years. Finally, O-probabilities below 50% were considered low risk of bankruptcy and given positive scores consistent with the model described in the monthly reports.

Top Positive Forensic Value Selections for April

5. Momentum Tests using the Bounce/Lag Momentum algorithm were applied to assess the rank order of current momentum conditions of each stock. In the non-linear scale of the model that screens 50,000 stocks on average, fewer than 10% achieve a score above 1 and still, fewer than 1% achieve a score above 5. In order to qualify for selection, each week a stock must achieve a B/LM score above 30 as detailed in the weekly reports. In the CFO Insider Trading list of purchases above $20,000, only two stocks registered a score above 1.

Winning Bounce/Lag Momentum Stocks For Week 20 Of 2019 (5/13-5/17)


This ad hoc study is intended to reveal any additional explanations for the CFO insider trading anomaly that is well documented to generate excess returns. Many published research studies are clear that insiders have far superior knowledge of their company and industry for timing purchases for the most favorable price growth. In particular:

CFOs derive statistically and economically higher abnormal returns from their purchases of company shares than do CEOs. Furthermore, CFOs' excess return is robust to controlling for risk factors. (Wang, Shin, & Francis, 2012, p. 758).

If this anomaly continues to be robust, then it seems logical that the combination and application of other robust quantitative models may help us select the best of the CFO insider trades. This portfolio of the top 10 of 33 insider stocks with purchases above $20,000 will be tracked over time to observe which set of models may forecast the best future performance of CFO insider purchases.

I hope these key financial tests of CFO insider trading from many different research studies serves you well.

All the very best to you and have a great week of trading!

JD Henning, Ph.D., MBA, CFE, CAMS

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.