Seeking Alpha
Long/short equity, insider ownership
Profile| Send Message|
( followers)  

In this article, I will feature one healthcare stock that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

NuVasive (NASDAQ:NUVA) engages in the design, development, and marketing of minimally disruptive surgical products and procedurally integrated solutions for the spine.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of NuVasive's insider-trading activity during the last 30 days by insider.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Alexis LukianovCEOJan 734,217Yes55,740 shares38.0%
Craig HunsakerSVPDec 30-Jan 79,255Yes21,142 shares30.4%
Michael LambertCFODec 2317,091Yes13,096 shares56.6%

There have been 60,563 shares sold by insiders during the last 30 days. All these shares were sold pursuant to a 10b5-1 plan.

SEC Rule 10b5-1 is a regulation enacted by the United States Securities and Exchange Commission (SEC) in 2000. The SEC states that Rule 10b5-1 was enacted in order to resolve an unsettled issue over the definition of insider trading, which is prohibited by SEC Rule 10b-5. After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade. This staff interpretation raises the possibility that executives can exploit this safe harbor by entering into 10b5-1 trading plans before they have inside information while retaining the option to later cancel those plans based on inside information.

For example, a CEO of a company could call a broker on January 1 and enter into a plan to sell a particular quantity of shares of his company's stock on March 1, find out terrible news about his company on February 1 that will not become public until April 1, and then go forward with the March 1 sale anyway, saving himself from losing money when the bad news becomes public. Under the terms of Rule 10b5-1(b) this is insider trading because the CEO "was aware" of the inside information when he made the trade. But he can assert an affirmative defense under Rule 10b5-1(c), because he planned the trade before he learned the inside information.

In general, it is a safer way for an insider to sell shares pursuant to a Rule 10b5-1 trading plan than without it.

Insider selling by calendar month

Here is a table of NuVasive's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
January 201439,1970
December 201321,3660
November 20135,0000
October 201383,5620
September 201300
August 201302,000
July 20138,6980
June 201300
May 201320,0002,400
April 201300
March 201300
February 201300
January 201300

There have been 177,823 shares sold, and there have been 4,400 shares purchased by insiders since January 2013.

Financials

NuVasive reported the third-quarter financial results on October 29 with the following highlights:

Revenue$169.2 million
GAAP net income$7.5 million
Cash$302.8 million
Debt$342.6 million

Outlook

NuVasive's 2013 guidance is as follows:

Revenue$670 million
GAAP EPS$0.07

Competition

NuVasive's competitors include Medtronic (NYSE:MDT), and Stryker (NYSE:SYK). Here is a table comparing these companies.

CompanyNUVAMDTSYK
Market Cap:1.54B60.01B29.34B
Employees:1,17346,65922,010
Qtrly Rev Growth (yoy):0.140.020.05
Revenue:660.11M16.76B8.89B
Gross Margin:0.750.750.68
EBITDA:95.14M5.65B1.65B
Operating Margin:0.060.290.15
Net Income:-853.00K3.81B890.00M
EPS:-0.023.742.33
P/E:N/A16.0433.29
PEG (5 yr expected):2.512.332.22
P/S:2.383.543.28

NuVasive has the highest PEG ratio among these three companies.

Here is a table of these competitors' insider-trading activities during the last 30 days.

CompanyInsider buying / sharesInsider selling / shares
MDT00
SYK

0

84,000

Only NuVasive has seen intensive insider selling during the last 30 days.

Conclusion

There have been three different insiders selling NuVasive, and there have not been any insiders buying NuVasive during the last 30 days. All three of these insiders decreased their holdings by more than 10%. NuVasive has an insider ownership of 0.40%.

There are nine analyst buy ratings, 14 neutral ratings, and one sell rating with an average price target of $33.50. Before entering short NuVasive, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are bearish analyst price targets, and the intensive insider-selling activity.

Source: NuVasive: 3 Different Insiders Have Sold Shares During The Last 30 Days