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 companies cashed in shares last week:

The week's selling

Company

Closing Price 12/31/08

Total Value Sold

52-Week Change

J.B. Hunt Transport Services (Nasdaq: JBHT  )

$26.27

$15,349,876

(3.4%)

Noble (NYSE: NE  )

$22.09

$681,070

(60.8%)

Red Hat (NYSE: RHT  )

$13.22

$260,282

(36.6%)

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 Netflix (Nasdaq: NFLX  ) and Heartland Payment Systems (NYSE: HPY  ) , whose insiders have mostly been cashing in on a predetermined schedule known as a 10b5-1 trading plan.

Companies typically find their way here because those selling either (a) exhibit good timing or (b) are dumping significant portions of their stakes. So when Charles Peters, chief financial officer of Red Hat, dumped 23% of his holdings last week -- essentially repeating a very profitable sale he made in April -- I took notice.

There reasons to like Red Hat, of course. An excellent earnings report in a lousy environment, for one. But the leading Linux distributor hasn't inspired an ownership culture among insiders. They own less than 1% of the outstanding shares, according to Capital IQ (a division of Standard & Poor's).

Hunt somewhere else if you want a winner
Executive owners at J.B. Hunt, with a 34% stake in this trucking business, are more committed -- unless you count recent selling. Johnelle Hunt, the widow of company namesake J.B. Hunt, has sold more than $40 million worth of stock since the beginning of December.

It's unlikely that many in our 125,000-plus Motley Fool CAPS community are surprised. Several of them see truckers like Hunt giving way to railroad operators such as Canadian National Railway (NYSE: CNI  ) and Union Pacific (NYSE: UNP  ) .

Union Pacific, in particular, is interesting because superinvestor Warren Buffett owns shares. Railroads are also the cheapest way to transport coal, argues Foolish colleague Christopher Barker. CAPS investor skifree99 agrees. Quoting from his June pitch:

Trucking is an energy intensive industry which can be, in part, substituted by rail. Recent expansion of oil production by Saudi Arabia will be in the long run trivial and will not lead to any significant reduction in diesel costs. This is a tough industry to be in now. I'd expect some kind of shake out soon.

So do his peers:

Metric

J.B. Hunt

CAPS stars (5 max)

**

Total ratings

172

Bullish ratings

121

Percent bulls

70.3%

Bearish ratings

51

Percent bears

29.7%

Bullish pitches

25

Bearish pitches

13

Data current as of Jan. 2, 2009.

All-Stars especially expect some kind of shakeout. Only 55% of our best stock pickers like J.B. Hunt to outperform, versus more than 70% for the rest of the community. They know something. Perhaps the same thing that Ms. Hunt, the seller, knows.

There's your update. See you back here next week 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. 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. Canadian National Railway and Netflix are Stock Advisor selections. Heartland Payment Systems is a Motley Fool Hidden Gems pick.

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


Read/Post Comments (2) | Recommend This Article (22)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 12, 2009, at 5:27 PM, madmilker wrote:

    well, you got one off -60% and another off -30% but tat third one is only off 3% in the past 52 weeks....do you ever look at long term debt of the three??? Jus maybe tat one tat is off only -3% the insiders sold cause they had to buy more gold, snuff, shove matches, black powder, fruit jars and a new collar for the coon dogs!

    But you young people wouldn't know what snuff is.... come to think about it...you know very little bout the market either.

  • Report this Comment On January 12, 2009, at 5:29 PM, madmilker wrote:

    oh! you'll do know what containers are...

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