U.S. Securities and Exchange Commission regulations on insider trading state that it “shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of material information with respect to the issuer or the security that is not generally available to the public.” Hence, corporate insiders who buy shares of their company before a huge positive announcement or sell shares before the release of a disappointing earnings report may receive a call, e-mail or visit from the SEC.
While Board members and executives can be penalized for buying and selling securities based on material non-public information, corporate insiders cannot be penalized for not trading securities. What do I mean by that? Corporate insiders are known for following the pattern of “buying low and selling high,” but how do they find attractive exit points? Let’s imagine for a minute that a COO plans to liquidate some shares for personal cash needs, but he or she quickly learns that the company discusses a possible sale of the entire business. The COO will most likely wait until the buyout offer is made public so that he or she can cash out at a much higher stock price. This case involves the usage of material non-public information, but the SEC cannot penalize the COO after all. All in all, while heavy insider selling does not imply worsening prospects for the company going forward, it might suggest that insiders do not anticipate any major positive developments in the near term. That said, let’s analyze a set of noteworthy insider transactions reported with the SEC on Monday.
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More Insider Buying at Healthcare-focused Holding Company
Shortly after three corporate insiders at Providence Service Corporation (NASDAQ:PRSC) bought shares in early September, another insider purchased a block of shares last week. David A. Coulter, appointed to the company’s Board of Directors in early July of 2016, purchased 4,225 shares on Friday in 14 transactions at prices that ranged from $46.99 to $47.50 per share. Following the recent purchase, Mr. Coulter currently owns 6,159 shares.
The shares of the holding company, whose subsidiaries provide critical healthcare and workforce development services, are up a little less than 1% since the beginning of the year. Providence Service Corporation (NASDAQ:PRSC) reported net consolidated service revenue of $450.63 million for the second quarter, up 7.7% year-over-year. In late August, healthcare-focused private equity firm Frazier Healthcare Partners inked a deal to acquire a 60% equity interest in health-assessment provider Matrix Medical Network, a subsidiary of Providence Service. Jim Simons’ Renaissance Technologies LLC was the largest equity holder of Providence Service Corporation (NASDAQ:PRSC) within our database at the end of June, with an ownership of 915,300 shares.
The next two pages of this article will discuss several other notable insider transactions reported with the SEC on Monday.