With so many contradictory news and indicators literally bombing financial markets every single day, one may have a hard time pinpointing a reliable forward-looking indicator that can support the security investing process. It can be argued that stock purchases by company executives and Board directors represent reliable forward-looking signals for retail investors. As well-known investment guru Peter Lynch once observed: “Insiders might sell their shares for any number of reasons, but they buy them for only one: They think the price will rise.”
Numerous academic studies support the investment guru’s statement; security purchases completed by executives and Board members tend to beat broader market benchmarks by a wide margin on an annual basis. Furthermore, both insider buying and selling data can be used as a valuable indicator for retail investors to get some insight into how the people running companies really think about the health of their companies. Indeed, insider buying usually serves as a positive indicator, and some people automatically assume insider selling is negative. But investors need to keep in mind that there are a variety of reasons for selling. There may also be reasons for buying shares that go beyond insider bullishness, such as the simple fact that some companies impose stock ownership guidelines requiring management to own a certain amount of shares. Without further ado, let’s have a look at a set of fresh noteworthy insider transactions observed at five publicly traded companies.
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CEO of Medical Equipment Maker Buys Shares After Lowering Revenue Guidance
According to our insider trading database, the insider buying activity at Natus Medical Inc. (NASDAQ:BABY) had been mute since early 2013 until this week. President and Chief Executive Officer James B. Hawkins snapped up 10,000 shares on Wednesday at a price tag of $38.48 each. Following the recent purchase, Mr. Hawkins currently holds an ownership stake comprising 459,725 shares.
The insider buying comes shortly after the provider of newborn care and neurology healthcare products and services lowered its third-quarter revenue guidance to the range of $89 million-to-$91 million from the previous guidance of $97 million-to-$98 million. The highest portion of the anticipated shortfall relates to the company’s decision to stop shipping some products from its Seattle facility whilst the company takes care of deficiencies in engineering and manufacturing quality processes. Falling demand in international markets partly explains Natus Medical Inc. (NASDAQ:BABY)’s lower revenue guidance as well. The medical equipment maker also agreed to acquire the GN Otometrics business – a manufacturer of hearing diagnostics and balance assessment equipment, disposables and software – from GN Store Nord for $145 million in cash. The shares of Natus Medical are 16% in the red thus far in 2016. Steve Cohen’s Point72 Asset Management acquired a new stake of 622,600 shares of Natus Medical Inc. (NASDAQ:BABY) during the second quarter.
The next pages of this insider trading article will reveal other notable insider transactions reported with the SEC on Wednesday.