Why the Ramsay Health Care Limited share price is sinking lower today

One of the worst performers on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) on Tuesday has been the Ramsay Health Care Limited (ASX: RHC) share price.

In early afternoon trade the private hospital operator’s shares are down over 4% to $61.98.

This latest decline puts Ramsay Health Care’s shares within a whisker of their multi-year low of $61.06.

Why are Ramsay Health Care’s shares sinking lower today?

With no industry news or broker notes that I’m aware of, it appears today’s decline is related to a change of director’s interest notice filed by the company after the market closed on Monday.

According to the release, Ramsay Health Care’s CEO and managing director Craig McNally sold 75,000 shares on-market last week for approximately $4.8 million.

The company has explained that Mr McNally has sold his shares primarily to meet personal income tax obligations which have resulted from past awards of remuneration in the form of vested shares.

Furthermore, despite the hefty sale McNally still holds 338,351 ordinary shares and 150,341 performance rights that have not yet been vested.

What now?

It never looks good when a CEO offloads such a sizeable stake in a company and I can’t say I’m surprised to see its shares tumble lower on the news.

Especially given how Ramsay’s shares have been under significant pressure over the last 12 months due to weak trading conditions. This development may have shareholders concerned that McNally doesn’t see any material upside for the company’s shares on the horizon.

Which is exactly how I feel about Ramsay Health Care’s shares right now. Although I am a huge fan of the company, I expect tough trading conditions will limit its earnings growth over the next couple of years and potential drive its share price lower.

In light of this, if I were a shareholder I would be tempted to follow the lead of Mr McNally and offload shares today.

Instead, I would be picking up healthcare companies that are kicking goals such as CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH).

Alternatively, these blue chips could be even better investments right now.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Cochlear Ltd. and Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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