Don't Watch These Insiders

Beware of signals from corporate insiders: Their sales or purchases of shares may or may not reveal the true mood in the corporate suite. That appears to be the case at GMIS (GMIS), a major provider of health-care database systems.Insider activity at GMIS is hardly signaling one real prospect: a takeover.

GMIS Chairman, President, and CEO Tom Owens bought 5,000 shares on Mar. 1, raising his holding to 108,367 shares. On Mar. 31, GMIS Director Alan Miller reported he had sold 36,077 shares. A month before, Moore Capital Management Group cuts its stake to 4.7% from more than 5%. But after Miller sold his shares, Moore Capital switched direction and bought again, raising its stake to 6.5%.

Based on such activity, one would hardly conclude that a buyout was in the offing. But it may well be, according to one investment manager familiar with what's going on. This pro says a Big Board data processing company with revenues of around $1.8 billion has put out feelers to Owens that it is interested in acquiring GMIS at 35 a share. The stock, trading at 19 in late January, has been rising, closing at 25 3/8 on Apr. 11.

Apparently Owens has kept the approach under wraps and feels the offer doesn't reflect the true value of the company, says one insider. Another director, asked whether GMIS was a target, replied: "I wouldn't be surprised, but who knows? I couldn't tell you about these things even if I knew."

Based just on estimated earnings growth of more than 30% annually over the next several years, some analysts put the value of GMIS at 36. In a buyout, one investor figures it's worth 40 to 45.

GMIS' appeal is software programs. Its "knowledge-based software systems empower insurance companies, managed-care organizations, and other health-care payers to manage the cost, quality, efficiency, and appropriateness of care," says analyst Ann Gallo, who just moved to Bear Stearns from Piper Jaffray.

One popular GMIS product is Claim-Check, software that helps payers identify improper claims. Another is Insight, a clinical and financial database that organizations use to profile or judge a doctor's performance relating to cost, quality, and efficiency of care. A New York money manager argues that a larger database-systems company could provide GMIS' systems to a wider network of users in the U.S. and overseas.

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