Eye on Insiders: Yahoo!

Watching insiders is like participating in a weeks-long stakeout. You expect something to happen, but you don't know what. So you settle in, sip your coffee, and wait for clues to solving the big case.

Here, the "case" is direction: Which way is your stock headed? The "clues" come in the form of insider buying and selling action. Have a look at Yahoo! (Nasdaq: YHOO  ) over the past year.

Insider Rating

Bearish
Many sales at prices below where the stock trades for presently. Buys at levels well below where the stock trades for today.

Business Description

An early pioneer in Web search, Yahoo! may have already seen its best days, at least in many investors' opinions.

Recent Price

$14.93

CAPS Stars (out of 5)

**

Percentage of Shares Owned by Insiders

9.34%

Net Buying (Selling)*

$66.9 million

Last Buyer (% Increase)

John Chapple, director
6,000 shares at $12.07 apiece on Feb. 18
(Purchase bolstered direct holdings by 42%)

Last Seller (% Decrease)

Michael John Callahan, EVP and general counsel
20,000 shares at $14.63 apiece on Aug. 7
(Sale represented 7% of remaining direct holdings)

Competitors

Google (Nasdaq: GOOG  )
Time Warner (NYSE: TWX  )

CAPS Members Bullish on YHOO Also Bullish on

Apple (Nasdaq: AAPL  )

CAPS Members Bearish on YHOO Also Bearish on

Microsoft (Nasdaq: MSFT  )

Recent Foolish Coverage of YHOO

The Next Leap Forward in Search
The Slap Heard 'Round the World
Yahoo!'s Arabian Bet

Sources: Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of Aug. 28.)
*Open market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times, they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Those personal holdings matter the most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view: Bearish
CAPS investors have been skeptical of Yahoo! for a while now, granting the search laggard just two out of five stars over the past year. I've been a skeptic, too. When my editors asked which stock I'd name the most frightening for last year's Halloween special, I chose Yahoo!.

I'm not alone. Investors seem to think of Yahoo! as they do eBay (Nasdaq: EBAY  ) or Overstock.com (Nasdaq: OSTK  ) : once-sexy dot com businesses that have long since lost their sizzle. This is especially true of Yahoo!, which may as well have gutted itself when it asked Microsoft and Bing to take over the heavy lifting in its search business.

Social search is still a possibility, sure, but few Fools seem confident. "If it wasn't for Yahoo! Finance I would have forgotten all about them," wrote CAPS investor sempire in a bearish pitch from earlier this month. "Sure, Yahoo! was great in the 90's, and Yahoo! mail was a great solution to Hotmail, but now is Yahoo! even relevant?"

No Yahoo! insider would ever say that about their business. Not on the record, at least. Nevertheless, the action looks very bearish to me. Carl Icahn was responsible for the vast majority of the buying, and at prices lower than we're seeing today. The sellers, meanwhile, have also sold at lower prices than we're seeing today, a combination that suggests lower prices are still ahead.

But that's also just my take. Do you agree? Disagree? Log into CAPS today and tell us how you would rate Yahoo!.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here or use the comments box below. I'll write this column as often as you, our readers, demand. (And for the record, today's column was by reader request.)

Get more of the inside scoop with related Foolishness:

Google is a Motley Fool Rule Breakers recommendation. Microsoft is a Motley Fool Inside Value pick. Apple and eBay are Motley Fool Stock Advisor selections. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers had stock and options positions in Apple and Google 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. The Fool's disclosure policy has its eye on you.


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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 August 29, 2009, at 10:56 AM, plange01 wrote:

    just when yahoo was showing signs of a turn around their new ceo made a terrible deal with microsoft that sent the stock straight down.if yahoo continues at its present course this company will fail.

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