According to a filing with the SEC, Eric Wiseman, who sits on the Board of Directors at health insurer Cigna Corporation (NYSE:CI), directly purchased 4,200 shares of the company’s stock on March 6th at an average price of $59.30 per share. He now owns a little less than 8,900 shares of Cigna, so in percentage terms this was a near doubling of his holdings. We track insider purchases because it generally doesn’t make sense for insiders to buy more shares rather than diversify, with the action only being rational if they are confident the stock price will rise. In fact, studies show that there is a small outperformance effect for stocks bought by insiders (learn more about studies on insider trading).
With a recent acquisition, Cigna Corporation reported higher revenue and earnings numbers in the fourth quarter of 2012- and for the year as a whole- than in the same periods in 2011. At a market capitalization of $17 billion, Cigna trades at 11 times its trailing earnings; health insurers are generally cheap as investors worry that the federal government will further regulate these businesses. Wall Street analysts are forecasting limited earnings growth over the next two years, with a forward P/E of 9. We would note that health insurers generally have little exposure to the broader economy, and Cigna is well in line with that pattern as it carries a beta of 0.6.
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