Insiders Buying Stryker's Shares (EDITORIAL)
BY JOHN MCCORMICK, NOVEMBER 3, 2005
It has never been empirically proven that insider (e.g. management and director) buying of a company's stock guarantees that the stock poised to rise, but it has also never been proven to be a bad sign. That's stating the obvious.
Since the notable October selloff of orthopedic shares, a curious phenomenon has been happening over at Stryker Corp.: insiders have been buying. In an unusual move, former CEO John Brown has recently exercised nearly a million stock options but hasn't sold them - a tax nightmare if the stock goes down, ergo a bullish bet on Brown's part. Not only that, but Brown has been buying shares in the open market. Add to the list a string of directors and the new Chief Executive Officer buying nearly a quarter of a million shares over the last six weeks and you get a notable pattern of confidence.
It's always difficult to read the tea leaves on situations like this. One armchair interpretation that can reasonably be developed is that the company is less vulnerable to the hip and knee implant pricing pressure that the markets are so worried about. Only 20% of Stryker's revenues come from those products. The Company is more diversified than pure plays like Biomet and Zimmer.
