Is Procter & Gamble (NYSE: PG ) headed higher, or lower? That's the question we ask when we evaluate insider buying and selling. We ask because how executives spend their paychecks is often a reflection of what they think of their companies' prospects.
Of course, not all buys are equal. According to two decades' worth of research from Dr. H. Nejat Seyhun compiled in his book Investment Intelligence from Insider Trading, buying is most predictive when it (a) comes from the CEO or other top-level executive, and (b) it's performed in bulk. Seyhun found buys from 10,000 to 100,000 shares to be most informative.
How do Procter & Gamble's managers measure up against Seyhun's benchmarks over the past year? See for yourself:
Although sales out number buys, CEO Robert McDonald is one of those buying -- and at a price above what the stock trades for currently.
|Business Description||One of the world's leading manufacturers of packaged consumer goods.|
|Motley Fool CAPS Stars (Out of 5)||*****|
|Percentage of Shares Owned by Insiders||0.06%|
|Net Buying (Selling)*||($1.39 million)|
|Latest Buyer (% Increase)||
Robert McDonald, Chairman, President, and CEO
6,423 shares at $63.45 apiece on Oct. 28
(Increased direct holdings by 11%.)
|Latest Seller (% Decrease)||
R. Keith Harrison, Global Product Supply Officer
4,714 shares at $64.17 apiece on Nov. 11
(Reduced direct holdings by 5%.)
Energizer Holdings (NYSE: ENR )
Johnson & Johnson (NYSE: JNJ )
Kimberly-Clark (NYSE: KMB )
Sources Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of Nov. 29.)
*Open-market sales and purchases only.
What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times, they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.
Those personal holdings matter the most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.
The Foolish view: bullish
Consumers may be borrowing less and buying fewer big-ticket items, yet consumer products remain timeless. Consider Procter & Gamble. Revenue and normalized net income are up 6.3% and 8% annually over the past five years.
Predictability is part of what has made P&G so attractive for so long. Strong, ongoing sales of brands such as Tide detergent, Crest toothpaste, Bounty paper towels, and Head & Shoulders shampoo have helped the company sustain a dividend that is a healthy 3.1% as of this writing.
“Brand loyalty will never go away. Once someone has a great experience with a product, they will continue to buy it. P&G has plenty of these trusted names and should do well during both good and bad times,” CAPS All-Star JuliusAFerraro wrote in October.
P&G Chief Executive Bob McDonald would appear to agree. Even though insider sales outnumber buys over the past year, McDonald recently spent more than $400,000 to add to his position in the stock, which was already substantial because of his position as CEO.
What's more, Keith Harrison, P&G's global product supply officer and the most recent big executive seller of shares, did most of his dumping after acquiring more than 90,000 shares via options on Nov. 1. He still owns more P&G shares today than he did before exercising those options.
Add it up, and you've got a management team that seems to be as bullish on P&G's long-term prospects as most Fools. Do you agree? Disagree? Log into Motley Fool CAPS today and tell us how you would rate Procter & Gamble. You can also add the stock to your watchlist.
And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here, reply to me on Twitter, or use the comments box below. I'll write this column as often as you, our readers, demand.