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8 Stocks With Big Insider Buying, Selling - 22457 views
WINDERMERE, Fla. (Stockpickr) -- For the week ended March 25, insider selling at S&P 500 companies outpaced insider buying by a ratio 18 to 1.
According to a weekly report out of Bloomberg,, the total amount of insider buying was $10.3 million, and the total amount of insider selling was $185.3 million. This is a continuation of the trend we’ve been seen for months now, with corporate insiders selling far more stock than they're buying. While insider selling was light this period relative to recent periods, with a selling-to-buying ratio 18 to 1, the sellers remain in control.
Are corporate insiders finishing off all of their selling as the second round of quantitative easing, or QE2, is about to come to an end in June? That’s possible, but if we do get QE3, then I expect to see the insider selling start all over again.
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Corporate insiders aren’t stupid. We’ve seen for months now how they’ve taken advantage of the Federal Reserve’s easy money policy, which has lifted almost every asset class, including stocks. The question now is whether the market will finally see a large correction if the Fed stops its quantitative easing program. We’re all going to find out very soon.
Despite the heavy insider selling we’ve seen for some time now, the overall market just continues to power higher. The Dow Jones Industrial Average right now is less than 30 points away from the current bull market high. The S&P 500 is just 14 points away from new highs, and the Nasdaq is only about 20 points away from bull market highs. Shorting or betting against this market has been a losing trade for months. That’s why I stress in my insider trading articles not to short the market or any stock unless it’s clearly in a downtrend.
It’s not enough to see big insiders selling and think you need to either dump all of your positions or short the market. Remember, for almost the entire year, we’ve had a Federal Reserve that’s flooded the market with liquidity. The entire insider selling was easily absorbed by this liquidity.
Before we get to the sellers, let's take a look at the buyers. For the week ended March 25, the three companies that saw the largest amount of insider buying were Titanium Metals (TIE), Sara Lee (SLE) and Dominion Resources (D).
Harold Simmons, the chairman of the board at Titanium Metals, bought 400,000 shares, or about $7 million worth of stock, at an average price of $17.62. Titanium Metals, a rare earth metals play, is a producer of titanium melted and mill products. Simmons has been a consistent large buyer of the stock for months now. Clearly, he’s finding a ton of value at around $17 a share, which is an area at which he’s been loading up on the stock since last November.
From a technical standpoint, TIE is starting to break out of a bullish basing pattern that it’s been forming for over a month. The next buy area will be when the stock trades above its 50-day moving average of $18.60 and its 200-day moving average of $18.88 on heavy volume. If you’re bullish on this stock, look for volume that’s well above the three-month average activity of 2.6 million shares as the stock moves above those levels.
Titanium Metals is one of TheStreet Ratings' top-rated metals and mining stocks.
Another key corporate insider has been loading up on stock at Sara Lee, a global manufacturer and marketer of brand-name products for consumers throughout the world focused primarily on the meats, bakery, beverage and household products categories. Jan Bennink, the executive chairman of the board, just bought 128,400 shares, or about $2.2 million worth of stock, at an average price of $16.95.
The last time that Bennink had any notable insider activity was back in January, when he was granted 154,685 shares, or $2.62 million worth of stock, at a price of $16.97. The newest purchase by Bennink is significant because he was only recently appointed to the executive chairman position at Sara Lee. It’s always a sign of confidence when a newly appointed key insider steps right up and buy large amounts of stock.
From a technical standpoint, shares of Sara Lee just started to trade above its 50-day moving average of $17.23 a share. However, the volume during the last five trading sessions has been weak or well below the three-month average volume of 9.9 million shares. The stock is also running into some resistance here at around $18 a share. I wouldn’t buy this name until it starts to trade above $18 on higher volume.
The stock could easily pull back toward a major support area at $16.50 a share, which might be an even better place to buy as long as the pullback comes on lighter volume.
Sara Lee showed up on a list earlier this month of 10 food stocks hit by commodity inflation.
Two directors at Dominion Resources, a producer and transporter of energy, bought 16,826 shares, or $749,996 worth of stock, at an average price of $44.57. What I love about this purchase is that the insiders are buying into strength since shares of Dominion are trading just a point off the stock's 52-week high of $46.56. The stock isn’t expensive either, trading at a trailing price-to-earnings of 9.5 with a forward price-to-earnings of 13.87.
From a technical standpoint, this stock just started to trade above some near-term resistance at around $44.88 a share. You could buy this stock right now with a stop at the 50-day moving average of $44.05. I would add heavily to any long position if the stock manages to break out above $46.56 a share on big volume. Look for volume on any breakout that’s well above the three-month average action of 2.6 million shares.
Dominion shows up on a recent list of 35 growing dividend stocks with low P/E ratios.
Now for the sellers. The top five S&P 500 stocks that showed up on the insider selling list for this reporting period were H.J. Heinz (HNZ), Pall (PLL), First Solar (FSLR), Cisco Systems (CSCO) and Priceline.com (PCLN). The total amount of selling in these five stocks alone was over $90 million. To put that into perspective, the next five stocks on the insider selling list didn’t top $35 million in total selling. There really was no predominant theme here, with the selling spread across a diverse group of sectors, including solar, technology and consumer staples.
What really jumped out at me out of the top five was the selling at Cisco Systems. This company designs, manufactures, and sells IP-based networking and other products related to the communications and information technology industry and provides services associated with these products and their use. Cisco has been a serial underperformer so far in 2011, with shares off by around 14%. If you pull the chart back to last April, the stock is down by over 34%. Here’s a situation where you would think the insiders would be finding some value in the stock and doing some buying.
But that’s not the case here with Cisco; instead, insiders are selling large amounts of stock. Now, to be fair, the recent selling was mostly the exercising of options by Larry Carter, a director at the company. Carter dumped 500,000 shares, or $8,718,400 worth of stock, at an average price of $17.44. Regardless, where are the buyers? The stock has been hammered from $27 a share hit last year to its current price of around $17.40.
From a technical standpoint, this stock has been stuck is in nasty downtrend since last May, with shares making lower highs and lower lows. This stock hasn’t given investors one sign that it’s worthy of an investment during that timeframe. Shares of Cisco have now started to find some support at around $17, but if that support level breaks, this stock could easily be on its way towards the next significant support area at $15 to $14 a share. If you’re long CSCO, I hope you have a stop in place in case this downtrend gets worse.
If you’re a Cisco insider, how about stepping up and buying some stock and showing the market that you have some confidence in your firm and also find some value at current levels? Maybe the insiders simply don't have the confidence or see the value.
The company that was hit with the largest amount of insider selling was Heinz. This company, together with its subsidiaries, is engaged in manufacturing and marketing a range of food products globally. The stock has done nothing so far in 2011, with shares essentially down just 1%. What’s so interesting here about Heinz is who was doing all the selling.
Billionaire Nelson Peltz, the founding partner of Trian Fund Management and a member of Heinz’s board of directors, sold a huge amount of stock. Peltz’s firm seeks to invest in undervalued and underperforming companies and work with management to build shareholder value. Well, Peltz just sold 792,751 shares, or $38.9 million worth of stock, at an average price of $49.09. Recent sales by Peltz have taken his total position down by around 37%, from 3.26 million shares to 2.05 million shares.
The recent sale comes on the heels of another big selling spree that Peltz did on March 14, when he dumped over 419,000 shares, or about $20.7 million worth of stock. If I were long this stock, I would be watching this very closely -- if Peltz is working his way out of his entire position, it could be because he doesn’t see much value in the stock at current levels.
I would like to point out that this stock has failed three times in the last six months whenever it has hit $49 to $50 a share. Clearly, there are some large sellers of the stock at those levels, so until it trades above that resistance, it's another major problem for the stock.
Heinz is one of 20 top-yielding food and beverage stocks.
More key insiders were dumping a ton of stock in Pall, which sits in the No. 2 spot on the insider selling list. This company manufactures and markets filtration, purification and separation products and integrated systems solutions worldwide. This stock is up around 15% so far in 2011.
Two key insiders, COO Roberto Perez and CEO and President Eric Krasnoff, sold 346,635 shares, or $19.7 worth of stock, at an average price of $56.96. Most of the selling was the exercising of options by Perez and Krasnoff. Following these moves, Perez still holds 26,000 shares, and Krasnoff has 78,415 shares.
From a technical standpoint, shares of Pall are close to a major breakout if the stock can manage to trade above some past overhead resistance at around $57.66 a share. If the stock blasts through that level, its all-time high, on volume well above its three-month average activity of 935,000 shares, then I would be a buyer or stay long if I was already in the stock.
Two market-leading stocks that were hit with big insider selling were global solar player First Solar and online travel company Priceline.com. A director at First Solar sold 100,000 shares, or about $15 million worth of stock, at an average price of $150.06. Market players should keep an eye on First Solar for a potential breakout if the stock can manage to trade above some near-term resistance at $160 a share. A move above that level should set the stock up for higher prices.
First Solar, which is one of the holdings of Al Gore's Generation Investment Management, was recently highlighted among seven stocks to benefit from a nuclear shortage, and was one of eight new "Conviction" stock buys at Goldman Sachs.
The vice chairman and COO at Priceline.com sold 18,000 shares, or about $8 million worth of stock, at an average price of $448.04. Shares of Priceline.com continue to power higher, with the stock now officially breaking the $500 a share mark. I suspect some of the recent move is window dressing, so watch to see how the stock acts next week.
Priceline was included in a list earlier this month of five online travel stocks with upside.
-- 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.