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Top Stocks With Huge Insider Selling - 13496 views
This was a bit of an improvement from the 8,280-to-1 selling to buying we saw just a few weeks ago. However, insiders continue to sell large amounts of stock, and the buying continues to be among only a hand full of companies, with few being worthy of a mention. According to a weekly report out of Bloomberg, corporate insiders purchased a total of $3.4 million worth of stock, while insiders sold $605.6 million worth of stock.
Before we dive into the top 20 stocks with insider selling, let's take a look at the buying.
The insider buying for the most recent reporting period was seen in the following stocks: Titanium Metals (TIE), American Tower (AMT), Time Warner (TWX) and Bank of America (BAC). Out of all of these names, the only significant buying that was over $1 million worth of stock was seen in Titanium Metals, which is a producer of titanium melted and mill products. The company is considered to be a secondary or derivative play on the rare earth metals markets. Titanium Metals is even included as a holding in the new Market Vectors Rare Earth/Strategic Metals ETF (REMX).
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What’s nice to see at TIE is that the chairman of the board, Harold Simmons, purchased 145,000 shares, or $2.6 million worth of stock, at an average price of $17.65. I always love to see a key insider buying a significant amount of stock. Simmons is also buying the stock into strength, with shares up around 35% year-to-date.
From a technical standpoint, TIE is currently stuck in a shorter-term downtrend, where the stock has been making lower highs and failing at key moving averages such as the 50-day and 200-day. The stock is now trading near some previous support at around $16.80, so if the stock can start to stabilize and move higher, it could be a good buy point. If you’re bullish on this stock, let’s hope the chairman helps to put in a near-term floor and the stock quickly gets back above the 50-day and 200-day moving averages.
For weeks I have been hearing from the bulls that key corporate insiders are selling large amounts of stock across a wide range of sectors because they’re getting ahead of coming changes to the capital gains tax code. I will give the bulls the benefit of the doubt that this reason could have played into a lot of the heavy selling. However, with the tax cut legislation through both houses of Congress and awaiting Obama's signature, the bulls are going to have to come up with something better to justify such large amounts of insider selling.
Even if you brush off the big insider selling, the bulls still need to explain why so few insiders are buying stock in S&P 500 companies. To me, that’s the more-telling indicator, and that’s why the insider selling combined with the lack of buying is becoming a major red flag.
This data alone doesn’t mean that anyone should run out and sell all of their equity holdings. In fact, as I write this, the Dow Jones Industrial Average is on the verge of breaking out above its closing price from 1999 of 11,497. This would be a significant milestone for the Dow and it could mean that the market is gearing up to go much higher. However, if the key insiders are selling because they know things that we don’t, then I would expect a problem in the markets or economy to happen more down the road.
With that in mind, here's a closer look at a few of the top 20 S&P 500 stocks with the largest amount of insider selling.
What I found interesting about the selling during this period is that a number of the stocks that were on the top of the list for total insider selling were defensive consumer noncyclical names. For example, the company that saw the highest amount of insider selling was Campbell Soup (CPB) which is a manufacturer and marketer of convenience food products. Insiders at Campbell Soup sold 2,443,921 shares or $84,014,235 worth of stock at an average share price of $34.38.
Another defensive name that investors tend to flock to in slower economic environments that saw a lot of selling was pharmacy services company CVS Caremark (CVS), which came in at the No. 2 spot for total insider selling for this period. Insiders at CVS sold 1.7 million shares, or $54.6 million worth of stock, at an average share price of $32.96. What’s troubling about the selling in CVS is that the insiders who were dumping stock were the chairman of the board and CEO, Thomas Ryan, and the president and COO, Larry Merlo.
To be fair, both of these key insiders were exercising options that do expire within a year, but they’re doing it at a time when the stock just flashed a major breakout above $32.50 a share. This stock actually looks pretty good technically, but there’s some major overhead resistance up around $38 a share, so maybe they were just selling ahead of another test of that resistance area. Either way, I never love to see a chairman of the board and the CEO selling such large amounts of stock in any company.
Another defensive consumer noncyclical play that saw big insider selling was HJ Heinz (HNZ), which is engaged in the manufacturing and marketing of a range of food products globally. Insiders at HJ Heinz sold 363,125 shares, or $17.9 million worth of stock, at an average share price of $49.30. The big seller at Heinz was a key insider: Chairman, President and CEO Williams R. Johnson. To be fair, again, it looks like Johnson was exercising options, but I find it interesting he did it as the stock is about to hit a major breakout. And before the bulls try to say that he exercised them because he had to because they must expire soon, well that’s not the case. According to SEC filings, the expiration date for these options wasn’t until Sept. 12, 2013.
From a technical standpoint, Heinz is just starting to form a major breakout above some previous overhead resistance at around $50.25. Why exercise those options now when it looks like the stock is about to enter another bull phase? Well, maybe Johnson doesn’t think the stock was going to hold the breakout and the shares are fairly valued. Time will tell.
Heinz is a top holding in Mark Hillman's portfolio at Hillman Capital, and with a buy rating from TheStreet Ratings, the stock is at the top of theTop-Rated Food Products Stocks list. Jim Cramer recently flagged it as a stock to watch, writing in a blog post that "we should be gravitating to the foods and drugs and soft goods stocks."
The tech sector was once again another area of large insider selling for this reporting period, with names such as NetApp (NTAP), Amazon.com (AMZN) and Salesforce.com (CRM) showing up on the list. All of these names saw insiders dump $12 million or more worth of stock for this reporting period.
Salesforce.com jumps out at me the most because it seems like every time this Bloomberg report comes out, the stock is on the top of the selling list. I can’t blame the guys at Salesforce.com for taking advantage of the high stock price -- the stock has been a huge winner year-to-date with shares up 83% -- to sell some of their positions, but they just never seem to let up.
From a technical standpoint, CRM just dropped from $151 a share to around its current price of around $137 a share in just a few trading sessions. What’s interesting here with CRM is that every time the insiders come in to dump a lot of stock, it seems to cause at least a short-term selloff. If I were looking to buy this stock, I would wait to see if the stock holds above the earnings gap up that the stock saw back in November. I would want to see CRM stay above the top of the gap at around $125 a share because if it falls below that price, it could fill the entire gap down towards $115 or lower.
Salesforce is a holding in professional portfolios such as Navellier & Associates and Renaissance Technologies, and its one of Jim Cramer's FADS CAN stocks. Jake Lynch recently flagged it as one of the 10 best-perfomring S&P 500 stocks of the year, but David Sterman of StreetAuthority said it'd be "crazy" to buy it at recent levels and named it one of 3 well-known stocks you don't want to buy.
The largest amount of selling in the tech space was seen in search giant Google (GOOG), which was the third highest on the list for total insider selling. Insiders at Google sold 92,494 shares, or $54.4 million worth of stock, at an average price of $588.37. The big seller for Google was Sergey Brin, the president of technology, who sold 83,334 shares, or around $49 million worth of stock. Brin has been a pretty consistent seller, and according to SEC filings he still holds around 27.5 million, so this isn’t necessarily a red flag.
From a technical standpoint, I would advise readers to watch for a breakout in Google above $600 a share. If the stock can get above that level, it should setup for a run towards $630. However, if $600 proves to be a touch psychological level, then the stock could be setting up for a correction, especially if the stock breaks the 50-day moving average at $591.63 a share on big volume.
Major holders of Google include Julian Robertson at Tiger Management and D.E. Shaw, and the stock shows up on TheStreet Ratings' list of top-rated Internet software and services stocks. In addition to showing up on the most recently weekly list of insider selling, Google was one of the top 10 S&P 500 insider selling companies of the year. It also made a recent list of the 10 top companies with cash to burn.
To see more stocks with heavy insider selling, including Target (TGT), Ameriprise Financial (AMP) and Limited Brands (LTD), check out the Top 20 S&P Stocks With Big Insider Selling 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.