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 1/29/09

Total Value Sold

52-Week Change

Amgen (Nasdaq: AMGN  )

$54.82

$191,272

14.2%

Morgan Stanley (NYSE: MS  )

$21.38

$248,383

(55.0%)

Schnitzer Steel Industries (Nasdaq: SCHN  )

$43.18

$440,139

(21.3%)

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

Insiders sell for many reasons, from compensation to estate or tax planning to just plain getting out, but their motives are rarely (if ever) given. That said, these are open-market sales, made by executives who have 100% control over the timing of their trades. Not so at Omniture (Nasdaq: OMTR  ) and CME Group (NYSE: CME  ) , 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. Amgen CIO Thomas Flanagan has sold roughly one-quarter of his direct stake in the stock since October.

Shares of Amgen haven't risen much in that time, but the business isn't exactly performing at peak condition. Its anemia treatment, Aranesp, isn't selling as well as the company hoped, and overall revenue growth was flat in the latest quarter.

Investors betting on Amgen now forecast that its new osteoporosis drug, denosumab, will achieve its blockbuster potential. Flanagan's sales probably don't reflect the odds there, since his expertise lies in the software and hardware infrastructure behind the business. But they aren't exactly a bullish sign, either.

Morgan not a fair child
At least Amgen has a catalyst. Banks are stuck in limbo, especially investment banks, and insiders seem to know it. At Morgan Stanley, Chief Administrative Officer Thomas Nides sold 5.8% of his holdings in the bank on Monday.

Fools might call that good timing. As my colleague Morgan Housel wrote recently:

While a tremendous amount of Morgan Stanley's ills are already priced in (with shares down more than 70% this year), I have trouble wrapping my head around its place in the new, smaller Wall Street. Sure, the death of Lehman Brothers and fallout from Bear Stearns represented a hefty shakeout. But when you consider that Goldman Sachs (NYSE: GS  ) has an unquestionably stronger reputation, Merrill Lynch has the financial backing of Bank of America, and JPMorgan Chase (NYSE: JPM  ) has one of the strongest balance sheets in the league, the silence surrounding Morgan Stanley's position on Wall Street is deafening.

(Crickets chirping.)

Our 125,000-strong Motley Fool CAPS community mostly agrees:

Metric

Morgan Stanley

CAPS stars (5 max)

**

Total ratings

1,571

Percent Bulls

76.2%

Percent Bears

23.8%

Bullish pitches

148 of 188

Data current as of Jan. 29, 2009

"Soon to be nationalized or heading towards zero. Either way, its ugly," wrote CAPS All-Star mikemasland last week.

He's right. Earlier today, The Wall Street Journal reported that the banker is thinking of reducing its payroll by 5%, or 2,350 workers. And that's after drawing on money available via the now highly controversial TARP program. Can't say that I blame Nides for selling; too many in his industry should be fitted for orange jumpsuits.

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

The inside scoop on stocks of all sizes:

JPMorgan Chase is an Income Investor recommendation, while Bank of America is a former pick. Omniture is a Stock Advisor selection. Try either of these Foolish services free for 30 days.

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.

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


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