INSIDER SELLING Jumps to Highest Level Since '07

Discussion in 'Wall St. News' started by GCSICLRBC, Apr 24, 2009.

  1. Insider Selling Jumps to Highest Level Since 2007 (Update1)
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    By Michael Tsang and Eric Martin

    April 24 (Bloomberg) -- Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market.

    Gap Inc.’s founding family sold $45 million of shares in the largest U.S. clothing retailer this month, according to Securities and Exchange Commission filings compiled by Bloomberg. Daniel Warmenhoven, the chief executive officer at NetApp Inc., liquidated the most stock of the storage-computer maker in more than six years. Sales by the co-founders of Bed Bath & Beyond Inc. were the highest since at least 2001.

    While the Standard & Poor’s 500 Index climbed 26 percent from a 12-year low on March 9, CEOs, directors and senior officers at U.S. companies sold $353 million of equities this month, or 8.3 times more than they bought, data compiled by Washington Service, a Bethesda, Maryland-based research firm, show. That’s a warning sign because insiders usually have more information about their companies’ prospects than anyone else, according to William Stone at PNC Financial Services Group Inc.

    “They should know more than outsiders would, so you could take it as a signal that there is something wrong if they’re selling,” said Stone, chief investment strategist at PNC’s wealth management unit, which oversees $110 billion in Philadelphia. “Whether it’s a sustainable rebound is still in question. I’d prefer they were buying.”

    Insiders Sell

    Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 institutional clients.

    That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the 17-month bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992, data going back more than 20 years show. That drop preceded a 2.4 percent slide in the S&P 500 in August 1992.

    The index rose 1 percent to 851.92 yesterday after better- than-estimated earnings at companies from Marriott International Inc. to ConocoPhillips and EBay Inc. overshadowed falling home sales and higher jobless claims.

    Looking Forward

    The S&P 500 has jumped 26 percent in 32 trading days through yesterday, the sharpest rally since 1938, on speculation the longest recession since World War II will soon end.

    Stocks rebounded as President Barack Obama outlined a $787 billion package of spending and tax cuts to stimulate growth, the Treasury unveiled plans to finance as much as $1 trillion in purchases of banks’ distressed assets and the Federal Reserve pledged to buy more than $1 trillion of Treasuries and bonds backed by mortgages to drive down interest rates.

    With corporate America stuck in its seventh straight quarter of earnings decreases, the longest in seven decades, executives may have become too cautious, said Penn Capital Management’s Eric Green.

    Investors are looking to the final quarter of the year, when S&P 500 companies will increase operating income by 74 percent, according to analyst estimates compiled by Bloomberg. They forecast profits will fall 32 percent in the second quarter and 19 percent in the third.

    “Things are a lot better than they were,” said Green, director of research at Penn Capital, which oversees $3 billion in Cherry Hill, New Jersey. Recent history also shows that “insiders have been wrong,” he said.

    Confidence Game

    Jeffrey Immelt, CEO of General Electric Co., purchased 50,000 shares at prices from $16.41 to $16.45 on Nov. 13, when the stock closed at $16.86. The shares have since fallen 30 percent after the Fairfield, Connecticut-based company reduced its dividend for the first time since 1938 and lost the AAA credit rating from S&P that it held for more than 50 years.

    Insiders of consumer and technology companies have been selling the most stock relative to the amount they purchased this month, data compiled by Washington Service show.

    John Fisher, Robert Fisher and William Fisher, whose parents Donald and Doris Fisher founded San Francisco-based Gap in 1969, sold a combined 2.99 million shares at between $15.11 and $15.36 a share on April 3 and April 17, SEC filings show. Gap rebounded 54 percent from its low on March 6. The stock gained 0.5 percent since the Fishers’ last sale.

    Reasons to Sell

    Gap spokesman Bill Chandler said that “from time to time, based upon the advice of financial advisers, the members of the Fisher family will decide to sell stock.”

    Warren Eisenberg and Leonard Feinstein, who founded Union, New Jersey-based Bed Bath & Beyond in 1971, sold 1.05 million and 1.1 million shares at $30.90 apiece on April 9, the most since at least December 2001, the filings show.

    The offerings came one day after Bed Bath & Beyond surged 24 percent, the biggest advance in nine years, on a smaller than estimated decline in fourth-quarter profit. Spokesman Ken Frankel said Eisenberg and Feinstein, who currently serve as co- chairmen of the largest U.S. home-furnishings retailer, sold for “estate-planning purposes and diversification.”

    At NetApp, Warmenhoven sold 1.25 million shares, the most since at least 2002, for about $21.3 million between April 3 and April 21 at prices from $16.10 to $18.10 a share, the SEC filings show. Shares of the Sunnyvale, California-based company, up 47 percent from the March 9 stock market low of $12.52, gained 1.8 percent since then.

    Moving On

    Warmenhoven sold shares he received from exercising stock options that were due to expire next month, according to an e- mailed response by Lindsey Smith, a spokeswoman for NetApp. He reaped a profit of about $7.3 million selling the shares at an average price of $17.08 apiece, based on the conversion price of $11.25 for options he held, the data show.

    “They’re going to say, ‘Thank you very much,’ and move on to cash or something else,” said David W. James, who helps manage about $2 billion at James Investment Research Inc. in Xenia, Ohio. “This is not a situation that suggests to us we’re seeing an economic recovery.”

    To contact the reporters on this story: Michael Tsang in New York at; Eric Martin in New York at

    Last Updated: April 24, 2009 14:40 EDT
  2. Bullish, very bullish.

    At some point they will be required to buy again.
  3. I remember how bullish insider buying was supposed to be right at the top of 07
    (was the most bullish ever).
    Boy did that ever turn out to be a fade.

    I wonder how accurate these metrics are.
    Can they really collectively be that bad at timing?
  4. Weren't they selling like crazy FOR YEARS up off of the '03 bottom?

    Personally I don't find this info to be a good timing indication, nor a good fade... better just to ignore.
  5. This is telling:

    << Gap spokesman Bill Chandler said that “from time to time, based upon the advice of financial advisers, the members of the Fisher family will decide to sell stock.” >>

    So FAs @ the major wirehouses are beginning to "scale out" some of their long positions.

    If June can't get above 872 soon this market is in trouble.

    That said, we're "channeling" now in an upward fashion. Sorry I can't paste my chart...

    When in doubt, just do the opposite of what Stock_Watch3r says!

    HAPPY WEEKEND ALL! Beautiful one here in the Windy City!