Tenet Insiders Hospitable to Buying

Tables: Buyers | Sellers

TROUBLE IN FLORIDA HAS CAST a dark shadow over Tenet Healthcare, but now significant insider buying may indicate that the hospital operator's rehabilitation is going well.

Over the past two days, Chief Executive Officer and President Trevor Fetter and independent director J. McDonald Williams spent an aggregate $486,400 to buy 129,500 shares on the open market, Securities and Exchange Commission filings show. Per-share prices ranged from $3.69 to $3.80.

Although the dollar amount looks small, the number of shares purchased make 2007 the largest buying year since 1999, based on trades tracked by Thomson Financial dating back to 1986. In terms of dollar value, it was the highest level since 2004 when insiders spent $647,700 to buy roughly half the number of shares in the latest purchase.

In the latest round of transactions, Fetter made his first purchase since March 2004 and fourth overall at Tenet. McDonald's only other open-market purchase at Tenet was reported in May 2005.

Fetter purchased these shares because "he is confident about Tenet's prospects and that the turnaround strategy will be successful, says company spokesman Steven Campanini. He declined to comment about Williams' transactions.

Fetter bought 50,000 shares for $184,800, increasing his direct stake to nearly 558,500 shares with indirect ownership to another 20,200 shares held by his wife and in a trust.

Williams significantly boosted his holdings to 95,700 shares by purchasing 79,500 shares for just over $301,500.

Tenet shares have fallen dramatically for the past five years when they traded over $50. The stock closed at $3.78 Thursday -- its lowest level in nearly three decades, adjusted for stock splits.

Tenet specifically has been plagued by a series of investigations into its business practices after an analyst questioned the company's Medicare reimbursement practices and the quality of care in 2002. Volume has been particularly soft in Florida.

Those issues have been resolved, says Tenet's Campanini, but that Tenet continues to face considerable industry headwinds as a greater burden of health-care costs are shifted to patients and the number of uninsured patients rises.

Tenet insiders are not the only ones buying hospital stocks. A slew of top executives and directors have also been making their largest purchases at Health Management Associates, LifePoint Hospitals and HealthSouth.

Ben Silverman, director of research at InsiderScore.com, says, "I think these guys are trying to call a bottom" to their stocks, but he doesn't think anyone is really bullish about this space right now. It's more of a valuation question.

It's worth taking a look at Tenet, Silverman says, because "even though we saw more aggressive buying elsewhere, [Tenet's] cash flow stands out against the pack."

It will take time for the company's turnaround to return Tenet to profitability. However, institutional owners have been willing to raise their bet on the company, even though the number of firms involved has fallen a bit.

Based on data from OwnershipAnalyzer.com, 494.7 million shares were held by 238 firms as of June 30, 2007, compared with 437.8 million shares held by 250 firms a year earlier.