As the saying goes, information is gold to the investor. Hence, every piece of information investors can get their hands on (information obtained via legal means) can assist their stock selection and analysis process. Insider trading data has served as an important piece of information for retail investors, analysts and hedge fund managers over the years. But what is insider trading and how can investors benefit from keeping track of insider trading behavior?
In simple words, insider trading involves the buying or selling of equity securities by individuals who hold access to material, non-public information. Of course, insider trading can be both legal and illegal, but this distinction is not overly important for non-insiders tracking insider trading activity reported with the SEC. Corporate insiders such as directors and executives usually have a better understanding of their companies’ business operations and future prospects than any of us; hence, their transactions can serve as great tips for outsiders. There appears to be one main reason insiders purchase shares in their own companies on the open market, which is that they believe the shares are severely undervalued or are poised to gain in the foreseeable future. One the other hand, insiders usually sell shares for a wide number of reasons (e.g. diversification needs, tax purposes, to name just a few), which explains why analysts and investors pay much more attention to insider buying than selling. Without further ado, let’s proceed to the discussion of several noteworthy insider transactions reported with the SEC on Wednesday.
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Cluster of Insider Buying at Medical Device Company After Share Price Plunge
Three different insiders at NuVasive Inc. (NASDAQ:NUVA) piled up more shares this week. To begin with, Joan B. Stafslien, Executive Vice President and General Counsel since early October, snapped up a new stake of 5,000 shares on Monday at prices ranging from $59.40 to $59.80 per share. Michael D. O’Halleran, who had joined the company’s Board of Directors in early August, also bought a new stake of 4,205 shares on Monday at a weighted average cost of $59.47 per share. The newly-bought stake is held through family trust. Board member Patrick S. Miles, who had joined the company’s boardroom with Mr. O’Halleran at the same time, acquired a stake of 16,967 shares this week at prices varying from $58.24 to $59.57 per share. The stake is held in a family trust. Mr. Miles also holds a direct ownership stake of 51,149 shares.
The shares of the medical device company took a hit after releasing its financial results for the third quarter. Hence, it appears that the three insiders intended to take advantage of the recent share price drop. NuVasive Inc. (NASDAQ:NUVA), which focuses on developing minimally-disruptive surgical products and procedurally-integrated solutions for spine surgery, reported revenue of $239.6 million for the quarter, marking an increase of 19.5% year-over-year. Despite the increase, the third-quarter top line came in lower than the company’s management had anticipated because of “capital and stocking orders in the United States that did not come through late in the quarter as planned.” NuVasive shares are 4% in the green this year. Navallier & Associates, founded by Louis G. Navallier, added a 73,994-share stake in NuVasive Inc. (NASDAQ:NUVA) to its portfolio during the third quarter.
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The next two pages of this insider trading article will discuss more noteworthy insider transactions reported with the SEC on Wednesday.