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6 Stocks With Big Insider Buying, Selling - 16468 views
According to a weekly report out of Bloomberg, the total amount of insider buying was $4.1 million, and the total amount of insider selling was $503.2 million. For the entire month of February, the total amount of insider selling registered a whopping $5.4 billion, while insiders bought just $128 million worth of stock. Once again, the trend of insiders selling far more stock than they’re buying remains in place.
Have corporate insiders simply been using some of the strength in the equities markets created by quantitative easing to dump their stock holdings onto the open market? A lot of traders believe this is true, but the real question is going to be whether the economy will improve enough to keep the U.S. stock market trending higher. And what if QE3 doesn’t happen -- will the put in the equity markets finally be removed making the way for a large correction?
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The market has already started show some cracks in the armor the last couple of weeks with the Dow Jones Industrial Average dropping from 12,390 to its current level of around 12,236 (it's picked up about 170 points today), and the S&P 500 falling from 1,344 to 1,326. Some market-leading stocks have also been hit hard, with Netflix (NFLX) down about 40 points off its highs and Google (GOOG) also down by 40 points. The market is clearly flashing some warning signs, but it has yet to be seen if this is a blip on the radar or the start of a much bigger correction.
With that in mind, here's a look at a number of companies whose insiders have been making some notable moves recently.
The three companies that saw the largest amount of insider buying that was at least over $800,000 for the last week of February were CB Richard Ellis Group (CBG), Lorillard (LO) and Noble Energy (NBL). Two more notable insider purchases that hit the wires on March 1 were seen in General Electric (GE) and Cabelas (CAB), both of which also exceeded $800,000 worth of stock.
CB Richard Ellis Group
The largest amount of insider buying was seen at CB Richard Ellis Group, which is a commercial real estate services firm with full-service operations in major metropolitan areas worldwide. Director Bradford Freeman bought 41,153 shares, or about $1 million worth of stock, at an average price of $21.16. This stock has been acting strong so far in 2011 with shares up around 18%. Traders should now watch for CBG to move above some past overhead resistance and breakout above $25.70 a share. A move above that level should mean higher prices are in the future for this stock.
The second-largest amount of insider buying was seen at Lorillard, which is a manufacturer of cigarettes in the U.S. Chairman, President and CEO Murray Kessler bought 12,500 shares, or $988,376 worth of stock, at an average price of $79.07. I would put this purchase in the important category since it was done by a key insider at Lorillard. I always love to see insider buying in a company that’s done by the CEO, CFO, general counsel or the chairman of the board. These insiders usually know the most about the company, so when they’re buying, I perk up.
Shares of Lorillard have recently sold off from its 52-week high of $89.71 to its current price of around $77 a share. It looks like Kessler is taking advantage of the recent weakness to pick up some shares.
Lorillard is one of the top holdings of Jim Simons' Renaissance Technologies, which owns 4.4 million shares. With a B- buy rating from TheStreet Ratings, it's one of the top-rated tobacco stocks, and it showed up on a recent list of the top 10 dividend stocks with upside.
Another company that saw a key insider do some buying was at General Electric, which is a diversified technology, media, and financial services company. Jeffrey Immelt, the CEO and chairman of the board, bought 40,000 shares, or $844,000 worth of stock, at $21.10 a share. With this purchase, Immelt increased his total holdings of GE by 2% to 1.86 million shares. This is the first time that Immelt has bought stock in GE since back in March of 2009. I consider this a pretty significant move considering the large span of time between his purchases.
From a technical standpoint, shares of GE have recently run into some overhead resistance at around $21.50 to 21.17 a share. The stock is now trading close to its 50-day moving average of $19.57 with shares currently trading hands at around $20.40 a share. If you’re bullish on GE, you’re going to want to see this stock get back above $21.50 which would signal a breakout is in the cards. However, if GE breaks below the 50-day moving average it could set the stock up to head back down to $18 a share.
General Electric shows up in Bruce Berkowitz's Fairholme Capital Management portfolio, with a position size of about 16 million shares. It's also one of Warren Buffett's top 10 dividend stocks.
The top six S&P 500 stocks on the insider selling list for the last week of February were Sara Lee (SLE), Franklin Resources (BEN), Intuit (INTU), Hess (HES), Google and Exxon Mobil (XOM). The total amount of selling just in these six stocks alone was over $289 million. The predominant theme here is that the selling was heaviest among oil companies, with HES and XOM rounding out the top six.
When I looked at the rest of the names that littered the list of S&P 500 stocks with the most amount of insider selling, I found two more oil-related names, with Murphy Oil (MUR) in the ninth spot and Pioneer Natural Resources (PXD) coming in at the 12th spot. The selling in oil- and energy-related names didn’t stop there going into the first week of March.
Among the top 10 open market sales that were filed on March 1, oil and energy companies once again showed up on the list with Hess, Denbury Resources (DNR) and Chesapeake Energy (CHK). Corporate insiders at Denbury and Chesapeake each sold over $3.3 million worth of stock.
Hess, which is a global integrated energy firm that operates in two segments -- exploration and production, and marketing and refining -- saw a key insider do most of the selling. John B. Hess, the CEO and chairman of the board, was the predominant seller of Hess stock at the end of February, selling 335,400 shares, or $28.1 million worth of stock, at an average price of $83.64 a share. Hess was also the sole seller on March 1 after he dumped 120,000 shares, or $10.3 million worth of stock.
Is Hess worried about his company’s exposure to Libya, which is reported to be at around 7.5% of the firm’s total oil and liquids production? I think it’s possible, but he could also just be locking in some profits, with Hess shares trading only about three points off their 52-week high of $87.40.
As of the most-recent reporting period, Hess was one of the holdings of D.E. Shaw, with a position size of 1.9 million shares. Action Alerts PLUS' Stephanie Link recently named it one of her top five energy stocks, and Jim Cramer recommended it on Feb. 25 on "Mad Money" as one of his U.S. oil plays.
Another key insider was selling a large amount of stock at Exxon Mobil, which is manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a range of specialty products. Insiders at Exxon sold 292,198 shares, or $25.1 million worth of stock, at an average price of $86.01. Rex W. Tillerson, the chairman of the board and CEO, made up more than half of the selling after he dumped around $17 million worth of stock via options he exercised. Michael J. Dolan, a senior vice president at the company, also sold around $5 million worth of stock.
In 2009, Exxon Mobil had around 25% exposure to the Middle East and Asia-Pacific and around 15% exposure to Africa. Again, I will raise the question: Are insiders at Exxon dumping stock because they’re worried about what political unrest in the Middle East and Africa could do to their business? I think this is something that investors need to keep an eye on. These giant global oil companies could see production problems if the unrest ends up spreading into Saudi Arabia or Iran.
From a technical standpoint, shares of Exxon have started to trend lower after the stock hit its 52-week high of $88.23. I would get concerned if I was long this stock if it takes out some strong support at around $81.60 and at the 50-day moving average of $79.18 on big volume that exceeds the three-month average action of 21 million shares.
As of the most-recent reporting period, Exxon showed up in Warren Buffett's portfolio, with a position of 421,800 shares. With a B+ buy rating, it's one of TheStreet Ratings' top-rated oil and gas stocks, and Jamie Dlugosch recently included it as one of his five dividend stocks to buy.
One final stock I want to highlight where a key insider was dumping an enormous amount of stock was at Franklin Resources, a global investment services company. Charles B. Johnson, the chairman of the board, sold 400,000 shares, or $50.7 million worth of stock, at an average price of $126.67. This stock is up around 11% so far in 2011, but the shares have recently slid from a 52-week high of close to $131 to its current price of around $124.
From a technical standpoint, I would get very concerned if this stock drops below some near-term support at around $122 a share and if it breaks the 50-day moving average of $119.56. If those levels are broken on big volume, then I could easily see this stock trade back towards $108 a share very quickly.
To see more stocks with notable insider activity, check out the Stocks With Notable Insider Activity portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.
At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.