Insiders Are Dumping These Three Stocks Despite Strong Performance

NxStage Medical Inc. (NASDAQ:NXTM) has seen strong insider trading on the sell side recently, but most insider sales were either connected to the exercise of stock options or were conducted under trading plans. So let’s briefly lay out the spur-of-the-moment insider sales that have occurred at the company over the past several days. Director Daniel A. Giannini cut its stake by 6,594 shares this Monday, remaining with 63,780 shares. The aforementioned block of shares was sold at a price of $20.3 per share. The medical device company has been making firm steps towards becoming profitable, which has been reflected in its latest quarterly earnings reports. NxStage’s third-quarter revenues grew 15% year-on-year to $86.5 million, beating analysts’ expectations of $82.1 million. The dialysis services company’s net loss tightened to $1.7 million from $6.7 million posted in the third quarter of 2014. However, it is not surprising to see insiders cash out their holdings if considering that the company’s shares have advanced nearly 15% so far this year. The stock became more popular among the hedge fund industry during the second quarter, as the number of top money managers invested in the company climbed to 30 from 21 quarter-over-quarter. Healthcare-focused Deerfield Management, managed by James E. Flynn, held a 5.77 million-share position in NxStage Medical Inc. (NASDAQ:NXTM) at the end of the second quarter.

Last but not least, we will investigate an insider sale registered at another information technology (IT) services company, Virtusa Corporation (NASDAQ:VRTU). Director Robert E. Davoli sold 5,979 shares in the first two trading sessions of the current week at prices in the range of $52.12-to-$52.19 per share, trimming his holdings to 6,864 shares. The IT services company has seen its shares advance 23% year-to-date, partly thanks its strong fiscal second-quarter financial figures and stronger-than-expected full-year guidance. Nevertheless, several valuation metrics suggest that the stock is relatively overvalued at the moment. Specifically, its trailing P/E ratio of 34.65 is significantly above the ratio of the S&P 500, while its forward P/E ratio is not a reason for optimism either. Going back to the company’s third-quarter earnings report, Virtusa reported earnings per share of $0.50, which were up by 13.6% year-on-year and $0.16 higher than the analysts polled by Thomson Reuters had anticipated. The company’s top-line grew 21% year-over-year to $143 million. A mere nine hedge funds tracked by Insider Monkey owned the stock at the end of the second quarter, stockpiling 1.40% of the company’s outstanding common stock. George McCabe’s Portolan Capital Management owned approximately 188,000 shares in Virtusa Corporation (NASDAQ:VRTU) on June 30.

Disclosure: None