Stocks to Avoid Now?

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 last week:

The week's selling

Company

Closing Price 12/26/08

Total Value Sold

52-Week Change

Nike (NYSE: NKE  )

$49.76

$210,115

(23.5%)

Steel Dynamics (Nasdaq: STLD  )

$10.80

$9,104,469

(63.8%)

Vornado Realty Trust (NYSE: VNO  )

$58.98

$8,779,583

(30.9%)

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 Accenture (NYSE: ACN  ) and Illumina (Nasdaq: ILMN  ) , whose insiders have mostly been cashing in on a predetermined schedule known as a 10b5-1 trading plan.

Firms typically find their way here because those selling either (a) exhibit good timing, or (b) are dumping significant portions of their stakes. Steel Dynamics insider John Bates happens to be good at selling -- he's made 10 money-saving sales since Oct. of 2006. And has liquidated close to 20% of his direct holdings over the past two weeks. Not a good sign.

"Here comes a tomato!"
Our smallest son, three-year-old Bradley, knows what a tornado is. He just has trouble pronouncing the word. To him, it's a tomato. So, too, is Vornado Realty, our 125,000-plus Motley Fool CAPS community might say -- a rotten tomato, spinning round and round as if in a blender:

Metric

Vornado Realty

CAPS stars (5 max)

*

Total ratings

316

Bullish ratings

142

Percent Bulls

44.9%

Bearish ratings

174

Percent Bears

55.1%

Bullish pitches

18

Bearish pitches

18

Note: Data current as of Dec. 27, 2008.

"I work in Manhattan Real Estate. I work for a company that owns over 120 buildings and our Occupancy Rate is at an all time high even with our 30% price drops," wrote CAPS investor JohnMcCloy earlier this month. Continuing:

Our retail spaces are on the downtrend and NYC is going to be the last bubble to burst. It's a simple formula. No financial jobs = less financial office space. No financial jobs = less nights out on the town eating and drinking. No eating and drinking = Inflated retail lease terms cannot be met and more turnover.

To be fair, Vornado is, on a price-to-earnings basis, trading at a discount to its industry average and peers such as Boston Properties (NYSE: BXP  ) and Brookfield Properties (NYSE: BPO  ) . And yet Vornado CEO Steven Roth is still selling. He dumped 149,000 shares last week and, like Bates, has a history of selling at excellent times. He's made 11 profitable sales this year alone.

Roth isn't the only one selling, either. Top funds such as Kinetics Paradigm (WWNPX) and Fidelity Balanced (FBALX) have been selling. So has the firm of top value investor Marty Whitman. His Third Avenue Real Estate Value (TAREX), a Champion Funds pick, was the second-largest institutional seller of Vornado shares as of July, reports Morningstar.

When a value investor sells, it's either because the shares are fully valued or the stock has become a value trap. To go by the recent selling, either maxim could describe Vornado right now.

There's your update. See you back here on Friday for more stocks you should avoid.

Get the inside scoop on stocks of all sizes with related Foolishness:

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. Illumina is a Stock Advisor selection. Accenture is an Inside Value pick. Third Avenue Real Estate Value is a Champion Funds recommendation.

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 is also on Twitter as @TheMotleyFool. Its disclosure policy is the undisputed heavyweight champ among disclosure policies.


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