Stocks to Avoid Now?

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

The week's selling

Company

Closing Price 12/18/08

Total Value Sold

52-Week Change

Sears Holdings (Nasdaq: SHLD  )

$39.38

$67,668,998

(62.7%)

Marvell Technology Group (Nasdaq: MRVL  )

$6.84

$40,706,093

(53.1%)

Copart (Nasdaq: CPRT  )

$26.92

$13,869,353

(34.3%)

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 Wynn Resorts (Nasdaq: WYNN  ) and Dollar Tree (Nasdaq: DLTR  ) , whose insiders have mostly been cashing in on a predetermined schedule known as a 10b5-1 trading plan.

Normally, firms that find their way here make the highlight reel because those selling exhibit good timing. Not this week. Volume is what concerns me today. Copart director Barry Rosenstein's sells are troubling because they're so ... massive. He's liquidated almost 44% of his partnership's Copart stake since the beginning of December. Rosenstein, a professional investor, is the founder of JANA Partners.

Everything must go!
But Rosenstein's selling is chump change. According to Form4Oracle, Sears Holdings insider Richard Perry, also a partnership manager, has sold off more than $60 million in stock in a week. Chairman Eddie Lampert touted his addition to the board in a 2005 press release.

"Richard Perry is an accomplished investor and businessman. Importantly, funds he manages are a significant owner of Sears Holdings shares. The Board of Directors looks forward to his contribution, advice and leadership," Lampert said at the time.

Does that advice now include selling as if the franchise is doomed? Doubtful. But our 120,000-plus Motley Fool CAPS community sees little hope:

Metric

Sears Holdings

CAPS stars (5 max)

**

Total ratings

2,042

Bullish ratings

1,589

Percent Bulls

77.8%

Bearish ratings

453

Percent Bears

22.2%

Bullish pitches

306

Bearish pitches

87

Data current as of Dec. 18, 2008.

"This company needs to drastically change its business model, or its going nowhere. I'm still trying to figure out why they bothered buying K-Mart if they aren't going to do anything with it?" wrote BSHumphreyll earlier this month. Continuing:

It has no chance of competing with Wal-Mart or Target at any time in the forseeable future. Why not turn K-Mart into a closeout/liquidation store and compete with Big Lots? As long as Sears continues to run in place, it's stock is going to underperform.

Most retailers face trouble this Holiday season. Gap (NYSE: GPS  ) is, like Sears, poised to drop, according to CAPS investors. Abysmal quarterly results don't augur well for a turnaround at Talbots (NYSE: TLB  ) . And then there's KB Toys, which last week got wiped out completely.

Could Sears be next? Lampert's probably too smart, and too well funded, to allow that. But skeptics have good reason to be skeptical. Wrote Foolish colleague Rich Duprey in naming Sears one of the World's Scariest Stocks:

[Lampert's] use of total return swaps has seemingly failed more times than it has worked in Sears Holdings' favor, and the idea that the retailer may have been some kind of asset play with valuable real estate in prime locations has faltered as the commercial market collapsed and credit remains in a deep freeze.

Spooky, indeed.

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

Get the inside scoop on stocks:

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

Fool contributor Tim Beyers also writes for Motley Fool Rule Breakers. Copart and Gap are Stock Advisor selections. Gap is also an Inside Value pick, as is Sears Holdings.

Tim didn't own stock in any of the companies mentioned in this article at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool.

The Motley Fool owns shares of Copart and is also on Twitter as @TheMotleyFool. Its disclosure policy is the undisputed heavyweight champ among disclosure policies.


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