Not all insider trades are created equally. Some go mostly unnoticed, while others generate a lot of buzz in the investment community.
The insider transactions that are of the buzzworthy variety tend to impact a stock’s price more than those that are not. These include trades placed by prominent executives, large institutional firms, or other major shareholders.
There is also the question of timing. When an insider trade occurs on the heels of a significant news event, it can magnify the impact of the news itself. For instance, if a CEO sells shares in the wake of a negative press release it can confirm the severity of the event—and potentially foretell of similarly bad news to come.
Last week there we several large insider trades that moved the needle. Some were in conjunction with major news items. Let’s look at three examples.
Why Did National Research Stock Rise Then Fall?
Healthcare analytics provider National Research (NASDAQ: NRC) reported third-quarter performance after the close on Tuesday (11/2). Revenue was up 13% to $38 million and operating income rose 9% to $13 million. The result was driven by higher sales from existing customers, new business wins, and the deployment of NRC services at partner organizations.
Investors liked the result and management commentary. National Research stock opened strong the next day climbing above $52 in morning trading. Soon thereafter, major shareholder Amandla Group sold 50,000 shares on behalf of the Amandla MK Trust. The trades were executed at an average price of approximately $50.55. NRC shares trended lower the rest of the day and closed at $48.72.
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This was an example of an influential shareholder pouncing on an opportunity to trim their position during post-earnings run. In this case, Amandla’s selling took the wind out the rally and despite a late Friday push, the stock has yet to return to $50. Amandla has been slowly scaling back its position in NRC over the last couple of years. Sometimes good news can be short lived when a heavy hand sells into a rally.
Which Insider Bought Clearwater Analytics Stock?
Clearwater Analytics (NYSE: CWAN) shareholders have been on a bit of roller coaster ride since the company make its public market debut six weeks ago. As the stock was enduring another dip last week, Clearwater announced quarterly results for the first time since going public.
The provider of automation software for the investment industry posted a 21% jump in revenue and a slightly narrower net loss. A positive fourth quarter and upbeat tone from management also pleased investors which bid up Clearwater Analytics by 5.6% the following day.
Adding fuel to the fire was a large purchase from an institutional investor. Durable Capital Partners, which specializes in small- and mid-cap growth companies, bought 303,870 shares of Clearwater during the three days leading up to the quarterly report. The well-timed $6.8 million purchase clearly suggests the firm anticipated a strong result.
This is a situation where a major shareholder transacted prior to a news event but the market didn’t learn about it until a few days later. Insiders have two business days from the time of a transaction to file a Form 4 with the SEC. They can opt to file notice of trades completed over a few days all at once. Here, insiders learned about the insider activity around the same time as the earnings release creating an impactful one-two punch.
Why Did Danaher Stock Go Down Last Week?
Danaher (NYSE: DHR) insiders have conducted net selling of $379 million over the last three months. The vast majority of the selling was at the hands of a single insider last week.
Executive committee Chairman Mitchell Rales sold a whopping $377.9 million of Danaher between November 2nd and November 4th. The trades were executed with the industrial conglomerate trading in the low $300’s and not far from the record intraday high of $333.96 from September.
The disclosure of the massive selling spree sent shockwaves through the market making investors wonder if the stock had hit its peak. On Friday, Danaher fell 4.2%. It was among the worst performers in the S&P 500 despite a strong day in the broader index. Trading volume was more than three times the daily average.
By the time to sales were completed, Mr. Rales had trimmed his direct ownership in Danaher equity nearly in half to around 1.2 million shares. He also holds a substantial indirect interest in the stock through an LLC and various family accounts.
It is unclear why the Chairman enacted such a huge sale two weeks after the company reported better than expected third quarter earnings. Investors can only speculate that Mr. Rales was simply reducing his exposure to the stock for diversification purposes. There has been no indication that Danaher’s business is in trouble, but the insider’s sale alone was enough to cause many to head to the exits last week.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Danaher (DHR) | $236.37 | -1.3% | 0.46% | 36.99 | Moderate Buy | $268.27 |
| Clearwater Analytics (CWAN) | $16.32 | +0.2% | N/A | -148.32 | Moderate Buy | $22.00 |
| National Research (NRC) | $32.87 | -1.4% | 1.46% | 26.30 | | N/A |
