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A Healthcare Stock Insiders Love

By Stansberry Research Interview Series
Wednesday, July 12, 2006

Insiders love healthcare stocks.
 
Health care equipment, pharmaceuticals, and health care supplies were three of the biggest industries for corporate insider buying at the end of June.
 
Combined with oil/gas exploration and casinos/gaming, these industries comprised 53% of all corporate insider buys for the period.
 
Because of the short-swing profit rule, insiders have to hold the shares they purchase for a minimum of six months before selling. Consequently, insider purchases usually forecast price spikes by about six months...
 
Which means we’re likely due for a six-month rally in healthcare stocks... particularly those with heavy insider buying.
 
Stocks like St Jude Hospital (STJ).
 
St. Jude designs and manufactures cardiovascular medical devices used in virtually any heart treatment procedure you can think of: surgery, fibrillation therapy, and cardiac rhythm management/ pacemakers, to name a few.
 
The vast majority (66%) of St Jude’s revenues come from its pacemaker segment. These devices are designed to moderate heart rhythms for patients suffering from too slow heartbeats. But it’s St Jude’s growth segment, implantable cadioverter defibrillators (ICDs), that have been the source of St Jude’s woes recently.
 
In early April, St Jude announced that its 1Q06 results would be lower than expected. Most damaging to share price was the drop in ICD revenues from an expected $300 million to $262 million.
 
Analyst outlooks were downgraded... and soon the class action lawsuits started rolling in as lawyers and investors claimed St Jude finagled its ICD numbers and inflated its expected sales in the segment.
 
This drop solidified St Jude’s downtrend of the past few months and presented an excellent buying opportunity for St Jude’s insiders. They bought over $2.4 million worth of the company’s stock in April alone.
 
Now, St. Jude stock is cheaper than it’s been in two years... bottoming out around $32 a share.
 
An oversold stock with a sound business and insider buying? Sounds like it’s time for a pop in share price to me.
 
More on this subject to follow...
 
Good trading,
 
Graham




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Market Notes
Food, soda, cigarettes, and drug stocks head higher: Consumer Staples ETF hits new 52-week high.
 
New Lows list filled with homebuilders and home furnishers.
 
Large cap tech stocks - as represented by the Nasdaq 100 - touch 2006 low.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%