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 4/3/09

Total Value Sold

52-Week Change

Cedar Fair (NYSE: FUN  )

$9.93

$86,207

(51.9%)

GameStop (NYSE: GME  )

$29.78

$963,724

(47.2%)

Solera Holdings (NYSE: SLH  )

$25.35

$1,324,711

(5%)

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 they rarely (if ever) make those reasons public. That said, these are open market sales, made by executives who have 100% control over the timing of their trades. Not so at Qualcomm (Nasdaq: QCOM  ) and BMC Software (NYSE: BMC  ) , 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. For Solera Holdings, which provides software and services to the auto insurance industry, it's the latter. CEO Tony Aquila and Chief Financial Officer Jack Pearlstein together sold more than $1.3 million in stock the same day we Fools were plotting to spend $25 million in bailout money. (Sort of.)

Few investors from our 130,000-strong Motley Fool CAPS community would be surprised. They downgraded Solera in December, and it's been a one-star stock since.

"Too much debt, unrealistic growth expectations as the car insurance business weakens, cost of repairing is skyrocketing, international business will collapse faster as they don't have the 'car' repair culture we in North America do," wrote CAPS All-Star broxburnboy on the day that Aquila and Pearlstein were selling.

Oh, irony, how I love thee.

But our Fool makes a good point. Insurance premiums decline as cars age. A thriving market for new autos means more high-priced premiums. Conversely, a lagging market hurts growth. There's little reason to be optimistic when most of Detroit is begging for change.

This selling is no game
On the other hand, I've been plenty bullish when it comes to Motley Fool Stock Advisor selection GameStop, a relative oasis in a retail desert that's withered Circuit City and others not named Best Buy (NYSE: BBY  ) .

CAPS investors, too, like what they see:

Metric

GameStop

CAPS stars (5 max)

***

Total ratings

3,043

Percent Bulls

95.6%

Percent Bears

4.4%

Bullish pitches

494 out of 528

Data current as of April 4, 2009.

"Video games have a cost to entertainment hours ratio ($59.99/hours of play for a new game) that out performs other types of entertainment," wrote CAPS All-Star ClandPhoenix last week:

I bought Gears of War and play online. The stats tell me I have about 40 hours of game play total so $59.99/40 = $1.50 per hour cost of entertainment where as a night out-dinner and a movie for two would cost roughly $50.00/3 = $16.67 per hour.

Yet risks remain. Amazon.com (Nasdaq: AMZN  ) sells games, and it's beginning to toy with trade-ins, a once-unique aspect of GameStop's business. Digital delivery is also gaining in popularity, thanks to broadband connections and better consoles. Who needs a mall retailer when you can simply download or log into your next adventure?

You won't hear GameStop insiders say that, of course. Yet two board members, Lawrence Zilavy and Stephanie Shern, sold big chunks of their holdings last week. Not exactly a bullish sign.

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:

Amazon, Best Buy, and GameStop are Stock Advisor selections. Best Buy is also an Inside Value pick. Try either of these Foolish services free for 30 days. There's no obligation to subscribe.

Fool contributor Tim Beyers also writes for Motley Fool Rule Breakers. He 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 Best Buy, and it's also on Twitter as @TheMotleyFool. Its disclosure policy is the undisputed heavyweight champ among disclosure policies.


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  • Report this Comment On April 06, 2009, at 2:27 PM, imalost wrote:

    Daily Amazon pump, buy stock with PE of 52 and PEG of 2.5 safe, specially if it's a retailer in a severe recession.

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