While Universal Health Services, Inc. (NYSE:UHS) shareholders have enjoyed a good week with stock up 11%, they need remain vigilant. Even though stock prices were relatively low, insiders elected to sell US$4.9m worth of stock in the last year, which could indicate some expected downturn.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

The Last 12 Months Of Insider Transactions At Universal Health Services

In the last twelve months, the biggest single sale by an insider was when the Executive VP, Steve Filton, sold US$4.4m worth of shares at a price of US$177 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$237. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 9.8% of Steve Filton's holding.

All up, insiders sold more shares in Universal Health Services than they bought, over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

Insiders At Universal Health Services Have Sold Stock Recently

The last three months saw significant insider selling at Universal Health Services. In total, Independent Director Nina Chen-Langenmayr dumped US$180k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

Insider Ownership Of Universal Health Services

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Universal Health Services insiders own about US$2.1b worth of shares (which is 13% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Universal Health Services Insiders?

An insider sold Universal Health Services shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. On the plus side, Universal Health Services makes money, and is growing profits. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 1 warning sign with Universal Health Services and understanding this should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.

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