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 2/13/09

Total Value Sold

52-Week Change

EMC (NYSE: EMC  )

$12.06

$1,340,690

(23.7%)

Aeropostale (NYSE: ARO  )

$22.29

$4,678,408

(20.4%)

Archer Daniels Midland (NYSE: ADM  )

$28.56

$1,971,531

(35.0%)

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 Yum Brands (NYSE: YUM  ) and Gymboree (Nasdaq: GYMB  ) , 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. Clothing retailer Aeropostale has mostly avoided Holiday Hell, unlike peers such as Abercrombie & Fitch (NYSE: ANF  ) . And now, like an oasis in a desert, it's attracting thirsty investors. Shares of this mall rat are up 38% year to date.

Buyers like Aeropostale's uncommonly strong same-store sales. Comps rose 11% in January, well above the 4.8% that Wall Street expected. "My Teens don't care that we are in a recession. They say they rather have only 5 shirts to wear and be Aeropostale than have 15 shirts from Walmart/Kmart/Sears. Fashion is a big deal to teens regardless of a recession," wrote Foolish investor IBDvalueinvestin two weeks ago.

So, why is CEO Julian Geiger selling? In his last sale, he parted with more than more than 60% of his direct holdings, selling into an uncommon and impressive rally. Either he has unbelievably poor timing, or he's cashing in before the stock has a chance to retreat. Be careful, Fool.

A barren crop for Archer Daniels Midland
Maybe you don't need the warning; our 125,000-strong Motley Fool CAPS community, on the whole, is cautious about Aeropostale, which they give just two stars. They're far less concerned about Archer Daniels Midland:

Metric

Archer Daniels Midland

CAPS stars (out of 5)

****

Total ratings

1,810

Percent Bulls

93.9%

Percent Bears

6.1%

Bullish pitches

330 of 351

Data current as of Feb. 15, 2009.

"A good recession stock. I'm just guessing, but I don't think the demand for corn syrup or oil is going to collapse. With commodities prices coming down that should help costs as well as the transportation end of the business. All the metrics look fine including p/e, peg, book, and debt levels," wrote CAPS investor mitleg in November.

Fast-forward to two weeks ago. An analyst at Barclays Capital questioned whether the firm's better-than-expected second-quarter profits were sustainable. At issue, apparently, were comments from CEO Patricia Woertz. She credited the beat to the outstanding performance of ADM's agricultural services division, saying in a conference call that it had been built to "deal with market volatility and market disruptions."

It's almost as if Woertz is positioning Archer Daniels Midland as the Southwest Airlines (NYSE: LUV  ) of its industry, able to hedge against commodity price upheavals just as the rebel airline has historically hedged its exposure to oil prices. Trouble is, that advantage went awry last year when per-barrel oil prices plunged. Management has since unwound most of Southwest's hedges through 2013, Reuters reports.

Hedges are, by their nature, risky. Perhaps that's why Archer Daniels Midland insiders are hedging their exposure to the company's stock? Four vice presidents have sold shares in the past week. One, Edward Harjehausen, dumped 31% of his stake last Monday.

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:

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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