Stocks to Avoid Now?

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If you're thinking of selling your stocks, you're not alone. According to insider tracker Form 4 Oracle, executives at these three firms cashed in shares this week:

The week's selling

Company	Closing Price 10/2/08	Total Value Sold	1-Year Change
Conn's (Nasdaq: CONN)	$17.92	$2,458,616	(28.4%)
Epoch Holding Corp.	$10.46	$260,789	(23.5%)
Myriad Genetics (Nasdaq: MYGN)	$64.75	$1,488,298	18.9%

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings. Sales from Sept. 25 - Oct. 1, inclusive.

These are open market sales, made by executives who have 100% control over the timing of their trades. Not so at TD AMERITRADE (Nasdaq: AMTD) and Vertex Pharmaceuticals (Nasdaq: VRTX), whose insiders have been cashing in on a predetermined schedule known as a 10b5-1 trading plan.

I point this out because our top three sellers tend to exhibit good timing. Like Chesapeake Energy (NYSE: CHK) CEO Aubrey McClendon, they preserve capital by selling before the fall. Top Conn's shareholder Warren Stephens is a good example. Form 4 Oracle says that he's made a number of very profitable trades in Conn's stock since May of 2005. He's a recent seller. So is CEO Tom Frank.

Maybe it's time to pull the plug ...
So is it time to short the appliance retailer, whose principal operations are in Louisiana, Texas, and Oklahoma? Not to our 115,000-plus-strong Motley Fool CAPS community:

Metric	Conn's
CAPS stars (5 max)	****
Total ratings	212
Bullish ratings	197
Percent Bulls	92.9%
Bearish ratings	15
Percent Bears	7.1%
Bullish pitches	35
Bearish pitches	2

Data current as of Oct. 3, 2008

Bulls include top value investor David Dreman and CAPS stock picker MagicDiligence, who is using Joel Greenblatt's Magic Formula to find winners. Conn's makes the list.

"Conn's is a regional appliance and electronics retailer," our Fool wrote in a blog post yesterday. "That's a tough business with a lot of competition, but a focus on customer service and a profitable in-house credit department makes this a decent MFI play."

Good point. But if you live by credit, can't you also be killed by it? Probably. Sears (Nasdaq: SHLD) recently offered consumers very generous credit terms for new appliances. Home Depot (NYSE: HD) has a six-month no-interest deal on big-ticket appliance purchases. Conn's has a long history of competing against these bigger stores, but with a credit crunch upon us, I wonder whether its earnings engine will stall.

Yet Conn's fundamentals still look good. Conn's earns higher returns on invested capital than either of its two national rivals and trades for just 9.9 times earnings, lower than the industry average and larger peers. With numbers like that, I understand why Dreman has been a buyer.

What I don't understand is why Frank was selling at $15 a share in July. Stephens, on the other hand, could be diversifying. His investment group owns roughly 50% of the outstanding shares, according to Capital IQ. (It's also his largest holding.)

For now, hold this stock if you own it; wait to buy if you don't. If Dreman is right -- and he usually is -- insiders and other top stock pickers will soon be nibbling on Conn's.

Finally, a question for you readers: Are you as interested in insider selling as you are insider buying? Either write to me or share your opinion in the comments box below. And be sure to tune in next week, when we resume our search for the next home run stock.

Further Foolishness:

• Find out which executives were buying last time.
• We're watching you, Wall Street.
• Read all about the bailout plan.
• Take these four steps to protect your portfolio.

On Oct. 7, 2008, Fool co-founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. In the coming weeks, the team, relying heavily on proprietary CAPS "community intelligence" data, will establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.