Dive Brief:
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A dozen Humana executives and managers have sold a total of 403,706 shares valued at $83.1 million since a ban on insider transactions was lifted following the dissolution of a planned merger with Aetna, the Courier-Journal reported.
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The selling spree was prompted because employees involved have had limited ability to trade stocks for about two years due to the pending merger, according to a Humana spokesperson.
- Corporate insiders selling off shares can indicate a potential fall in stock price, but financial analysts are mostly optimistic about financial performance for Humana and for the healthcare sector in general.
Dive Insight:
The stock selloff nor news of a new healthcare reform bill have spooked investors. Humana was the best performing stock on the S&P 500 on Tuesday, rising to $217.87 from $212.52.
While Congress has set the wheels in motion for healthcare reform, creating a degree of uncertainty within the industry, healthcare stocks have been performing relatively well since the beginning of the year. The iShares US Healthcare and Vanguard Health Care ETF have each gained about 8% since January compared to a gain of about 6% for the S&P 500.
Financial analysts do not seem to think that healthcare reform machinations occurring in Washington, D.C. should deter investors. An increase in demand for healthcare services necessitated by an aging population and strong financial reports from healthcare organizations bode well for investors, according to Brad Sorenson, a financial analyst for Charles Schwab. Investors, perhaps due to uncertainty, have undervalued the healthcare sector since the election and the market is due for a correction, according to Eddie Yoon, a portfolio manager for Fidelity.
Following the failed merger, Humana has a lot of cash on hand to play with. It just added about $630 million after taxes from a breakup fee paid by Aetna to nearly already $4 billion in reserve. The payer could still seek a merger with another payer. However, pickings may be slim following a merger spree and recent rulings that discourage payers from growing too big.