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Cluster of Insider Buying at Inovalon Holdings Inc. (INOV) after Slashing Guidance, Plus Other Noteworthy Pre-Holiday Insider Transactions

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Corporate insiders such as Board members and executives usually buy shares on the open market for one simple reason – they believe Mr. Market severely undervalues their companies’ shares. Moreover, past research concludes that the so-called insider trading anomaly is more prevalent in small-cap companies, which means corporate insiders at small firms tend to trade more profitably than insiders at large companies.

The phenomenon could be explained by the fact that most investors and brokers have only a limited interest in small-cap companies, so there is very limited research on small caps. Therefore, the difference between what corporate insiders at small-cap companies and outsiders know about prospects and business fundamentals tends to be quite pronounced. Although the insider trading anomaly is not only limited to small and unpopular stocks, the following article will discuss recent insider trading witnessed at one low-priced publicly traded company and other unpopular publicly traded companies, as well as renown companies such as Abbott Laboratories (NYSE:ABT).

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Insider Trading Back

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Massive Cluster of Insider Buying at Inovalon Holdings After Slashing Full-Year Guidance

Let’s begin our discussion by analyzing a cluster of insider buying observed at Inovalon Holdings Inc. (NASDAQ:INOV). To start with, Board member William J. Teuber Jr. purchased 26,000 Class A shares on December 16 at $9.25 apiece, lifting his overall holding to 95,559 shares. President Robert A. Wychulis snapped up 1,675 Class A shares on the same day at prices varying from $9.28 to 9.30 per share. After the not-so-distant purchase, Mr. Wychulis currently owns an aggregate of 32,942 shares. Board member Andre Hoffmann bought 200,000 units of common stock on December 16 at prices that fell between $9.17 and $9.40 per unit, a purchase that boosted his ownership stake to 309,559 units. William D. Green, who joined the company’s Board of Directors in August 2016, added 30,000 Class A shares to his portfolio, which currently comprises 68,351 shares. The block of shares was acquired on December 16 at a weighted average price of $9.29 per share. Last but certainly not least, CEO and Chairman Keith R. Dunleavy bought 100,000 Class A shares on December 14 at prices ranging from $9.10 to $9.25 per share, after which Dr. Dunleavy owns 180,000 shares.

The massive cluster of insider buying comes shortly after the provider of cloud-based analytics solutions for the healthcare industry reduced its full-year guidance, as the company was unable to enter into an expected collaboration agreement as a result of “unforeseen circumstances impacting the counter-party.” Inovalon Holdings Inc. (NASDAQ:INOV)’s shares have plunged by 38% over the past month, with the stock being down 42% year-to-date. Paul Tudor Jones’ Tudor Investment Corp had 22,595 Class A shares of Inovalon Holdings Inc. (NASDAQ:INOV) in its portfolio at the end of September.

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The next two pages of this insider trading article will digest more insider transactions recently reported with the SEC.

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