Can This Stock Go Higher?

Is Ford Motor (NYSE: F  ) headed higher or lower? That's the question we ask when we evaluate insider buying and selling. We ask because how executives spend their paychecks is often a reflection of what they think of their companies' prospects.

Of course, not all buys are equal. According to two decades' worth of research from Dr. H. Nejat Seyhun compiled in his book Investment Intelligence from Insider Trading, buying is most predictive when it (a) comes from the CEO or other top-level executive, and (b) it's performed in bulk. Seyhun found buys of between 10,000 and 100,000 shares to be most informative.

How do Ford's managers measure up against Seyhun's benchmarks over the past year? See for yourself:

Insider Rating

Moderately Bearish
No open market buys; recent sells not far below today's price. History says not to worry, however.

Business Description

One of the world's leading automakers, and the only American carmaker to not take bailout funds.

Recent Price

$13.73

CAPS Stars (out of 5)

**

Percentage of Shares Owned by Insiders

5.03%

Net Buying (Selling)*

($2.094 mil.)

Last Buyer (% Increase)

None

Last Seller (% Decrease)

Joseph Hinrichs, Group Vice President
21,499 shares at $11.40 each on average on Jan. 6, 2010. (Sale represented 94% of direct holdings.)

Competitors

Chrysler
General Motors
Toyota Motor (NYSE: TM  )

Suppliers

AK Steel (NYSE: AKS  )
Garmin (Nasdaq: GRMN  )

Recent Foolish Coverage of Ford and Competitors

Ford's Stunning Leap Forward
What Really Happened to Toyota?
For Toyota, This, Too, Shall Pass

Sources: Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of March 18.)
*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: moderately bearish
Ford would seem to offer an almost-textbook pattern for bearish selling. Not only are insiders dumping stock in the volume sweet spot Seyhun specifies -- 10,000 to 100,000 shares -- but they've also accelerated their selling recently.

Consider Group Vice President Bennie Fowler, who oversees Ford's processes for ensuring quality. He sold nearly 20% of his direct holdings over two days last March. Then, in December, he sold 27% of his holdings in a single day. Group Vice President Joseph Hinrichs cashed in 94% of his holdings in January. Executive Vice President John Parker cashed in 75% of his holdings in December.

Wait, it gets worse. The lone buyer of shares, board member Homer Neal, isn't mentioned in the table above because he bought and sold on the same day, after a $0.01 gain. It's as if he accidentally clicked the buy button. Buyer's remorse, perhaps?

And yet recent history should offer Ford investors some encouragement. Insiders parting ways with big chunks of shares last year and in early 2010 haven't done much damage, according to Form 4 Oracle. Over the past year:

  • Microsoft (Nasdaq: MSFT  ) insiders have sold more than 81 million shares at an average price of $25.37 each. The stock closed last night at $29.61.
  • Nike (NYSE: NKE  ) insiders have sold more than 5.2 million shares at an average price of $64.86 each. The stock was just at $74.66.
  • Amazon.com (Nasdaq: AMZN  ) insiders have sold close to 5.8 million shares at an average of price of $98.85 each. The stock finished yesterday at $132.76.

Ford's underlying business is also performing well. Long-absent sales growth recently returned, allowing the carmaker to invest in growth again. For example, in the U.K., Ford plans to spend 1.5 billion pounds to develop low-carbon emission diesel and petrol technologies, Reuters reports.

Executive selling at Ford has me nervous enough that I'm unwilling to buy the stock at these levels. But with this much business progress, and with weakened competitors, shorting would be crazy and selling premature.

Do you agree? Disagree? Log into Motley Fool CAPS today and tell us how you would rate Ford.

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.

Microsoft is a Motley Fool Inside Value choice. Amazon and Ford are Stock Advisor selections. Motley Fool Options has recommended a diagonal call position on Microsoft.

Fool contributor Tim Beyers is a member of the market-beating Motley Fool Rule Breakers stock-picking team. He didn't own shares 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. The Fool's disclosure policy has its eye on you.


Read/Post Comments (2) | Recommend This Article (41)

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 March 19, 2010, at 5:58 PM, R0N0DUDE wrote:

    So even though in the past 15 month's Ford's market share has grown, it is ahead of sched. on getting in the black, it's reliabillity rating has improved, it has the only 300 hp sports car and price per share has grown over 900%, your not sure you want to buy! It's a no brainer. there will be up's and downs but I know it will hit $25.

    Ford does not want to be the biggest name in the industry, they just want to be the best. which shows me that ford stock will mostlikely never hit $50+ a share. It's just common sense not tables, charts and figures.That's why teachers teach and do-ers do.

  • Report this Comment On March 19, 2010, at 7:08 PM, Varchild2008 wrote:

    We touched the magical number of $14.00 so a pullback in the stock...a SIGNFICANT one is beyond expected..... This one has been overbought for days....

    So... I am thinking we are entering a leveling out, sideways trading period that could see the stock dip to $11.XX again....before perhaps rallying upward once more.

    So I guess Valuemoney might actually see his score turn GREEN in the short term.....possibly....

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