Stocks to Avoid Now?

Editor's note: A previous version of this article used a source for insider selling data that reported incorrect information. We regret the error.

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 11/26/08

Total Value Sold

52-Week Change

Williams-Sonoma (NYSE: WSM  )

$7.46

$5,366,484

(72.4%)

NetApp (Nasdaq: NTAP  )

$13.45

$5,121,351

(43.7%)

BioMarin Pharmaceutical (Nasdaq: BMRN  )

$16.37

$1,198,740

(35.9%)

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle.

Insiders sell for many reasons, ranging from compensation to estate or tax planning to just plain getting out, but the reasons are rarely (if ever) given. Having said that, these are open market sales, made by executives who have 100% control over the timing of their trades. Not so at Riverbed Technology (Nasdaq: RVBD  ) and AeroVironment (Nasdaq: AVAV  ) , whose insiders have mostly 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. BioMarin chief medical officer Emil Kakkis is a good example. He's made seven very profitable trades over the past four years, including a $97,000 purchase in May 2004. Shares of BioMarin have more than doubled since.

A marginal excuse
First it was Chesapeake Energy (NYSE: CHK  ) CEO Aubrey McClendon. Then it was executives at Boston Scientific (NYSE: BSX  ) . Now, it's ailing retailer Williams-Sonoma that's become subject to margin-driven selling pressure.

Chief executive Howard Lester sold more than 800,000 shares last week, and much more than that in weeks prior, to "satisfy collateral requirements," The Associated Press reports.

Usually such sales aren't reflective of the underlying business. Our 120,000-plus Motley Fool CAPS community nevertheless has concerns:

Metric

Williams-Sonoma

CAPS Stars (5 max)

**

Total Ratings

177

Bullish Ratings

125

Percent Bulls

70.6%

Bearish Ratings

52

Percent Bears

29.4%

Bullish Pitches

29

Bearish Pitches

9

Data current as of Nov. 26, 2008.

"So very discretionary it is scary, correlated to housing, no one is trading down to these stores, people are trading down away from these stores," wrote CAPS All-Star dwelllewd earlier this month. "Has ayone looked in William Sonoma recently? A $2000.00 coffee machine? It makes espresso."

Retailers, generally, are in holiday hell. Pier 1 Imports plans to give away a car and several $500 in-store gift certificates. T.G.I. Friday's is giving away dessert to members of its frequent diners club. And Williams-Sonoma will give shoppers a $10 coupon, usable after Dec. 26, for every $50 they spend this weekend.

Smell that? It's the foul stench of desperation, Fools.

Exactly how desperate is anyone's guess. But Williams-Sonoma, also the parent company of Pottery Barn, has been plagued with problems since late October, when executives said that the retailer would lose $0.10 to $0.12 in Q3, well below earlier forecasts.

There's your update. See you back here next week for more stocks you should avoid.

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Fool contributor Tim Beyers also writes for Motley Fool Rule Breakers, which counts AeroVironment and BioMarin among its recommendations. Get access to all of Tim's Foolish writings here.

Tim didn't own stock in any of the companies mentioned in this article at the time of publication. Chesapeake is an Inside Value pick. The Motley Fool's disclosure policy is the undisputed heavyweight champ among disclosure policies.


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