Different investors employ various trading strategies and follow different investment philosophies, so they tend to look at a wide array of aspects when deciding whether to buy, keep or sell a certain company’s shares. Insider trading behavior is one key aspect investors need to monitor, as shifts in insider sentiment could serve as accurate indicators of future stock performance. Corporate insiders are widely known for following the pattern of buying low and selling high – a contrarian approach to investing that has enabled them to beat stock market gauges over the years.
While insider buying appears to be quite easy to interpret, investors should be aware of the fact that insider selling could be misinterpreted quite often. As a general rule, insider sales are considered less informative than purchase transactions, because there is a wide range of reasons for corporate insiders to sell shares. Some of these reasons include personal cash needs, tax payments, or simple portfolio diversification. However, if I were investing my cash into a company’s stock, I would definitely be troubled by heavy insider selling regardless of the reasons corporate insiders sell shares. Hence, abundant insider selling may drive some investors to run for the exits. That said, this article will discuss a set of insider transactions reported with the SEC on Thursday.
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Interim CEO of Struggling Nutritional Supplements Retailer Buys Nearly $5 Million Worth of Stock
To start with, the current head of GNC Holdings Inc. (NYSE:GNC) snapped up a large number of shares at the beginning of the week. Robert F. Moran, interim Chief Executive Officer since late July 2016, bought an aggregate of 592,259 shares on Tuesday at prices varying from $7.64 to $8.83 per share. Mr. Moran currently owns a total of 653,271 shares following the massive purchase.
The global specialty retailer of health, wellness and performance products has seen its market capitalization decline by a disturbing 70% in the past 12 months. GNC Holdings Inc. (NYSE:GNC) recently released disappointing fourth-quarter financial results, as well as announced the suspension of its $0.20-dividend in order to free up around $55 million of cash to reduce debt. The nutritional supplements retailer’s fourth-quarter revenue fell by 9% year-on-year to $570 million, while sales at existing company-owned stores in the U.S. and on the website dropped by 12% year-over-year. Some are concerned over the company’s huge pile of debt, which totaled $1.54 billion at the end of December. GNC Holdings had a mere $34.5 million in cash and cash equivalents at year-end. More importantly, the company has non-cancelable contractual obligations of $1.57 billion due in 2018 and 2019, so one should be careful when thinking of following Mr. Moran’s move. Stockholm-based HealthInvest Partners AB, founded by Anders Hallberg and Carl Bennet, trimmed its position in GNC Holdings Inc. (NYSE:GNC) by 13% during the fourth quarter to around 423,000 shares.
The second page of this insider trading article will reveal fresh insider buying observed at two other companies.