Can This Stock Go Higher?

Is Seagate Technology (NYSE: STX  ) 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. Here's how CEO Stephen Luczo and his team have spent their money over the past year:

Insider Rating

Moderately Bearish

Selling at recent levels has offset earlier buying, which occurred at much lower price points.

Business Description

One of the heavies in the market for disk drives and other data storage technology.

Recent Price

$17.68

CAPS Stars (out of 5)

***

Percentage of Shares Owned by Insiders

2.19%

Net Buying (Selling)*

$749,831

Last Buyer (% Increase)

Stephen Luczo, Chairman, President, and CEO

100,000 shares at $12.38 apiece on Aug. 25, 2009

(Purchase bolstered direct holdings by 2%.)

Last Seller (% Decrease)

David Marquardt, director

200,000 shares at $15.15 apiece on Nov. 30, 2009

(Sale represented 13% of direct holdings.)

Competitors

Hitachi (NYSE: HIT  )

Western Digital (NYSE: WD  )

CAPS Members Bullish on STX Also Bullish on

Microsoft (Nasdaq: MSFT  )

CAPS Members Bearish on STX Also Bearish on

Bank of America (NYSE: BAC  )

Palm (Nasdaq: PALM  )

Recent Foolish Coverage of STX

Can Seagate Swim With the SSD Sharks?

Why the Future Is Now for Solid-State Drives

2010's Best Tech Stock: SanDisk

Sources: Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of Dec. 21.)
* 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
Skeptics who had sunk hard drive maker Seagate earlier this year have paid a heavy price. The stock is up more than 250% as of this writing, one of 2009's best performances.

At least one investor did even better than that: CEO Stephen Luczo. He paid $1.8 million for a half-million shares at $3.56 each on Jan. 27. That position is now worth almost $9 million. Congratulations, sir.

If only we were seeing more big bets like this one. Instead, insiders have been taking money out of Seagate. Five of six open market transactions since October have been sales, and some of them have been big. For example, on November 30, board member David Marquardt sold 13% of his direct holdings at $15.15 a share.

We don't know precisely why these insiders are selling. But competition could have something to do with it. Hard drives are a low-margin, commodity business, and Seagate badly trails Intel (Nasdaq: INTC  ) and others in supplying newer, more functional solid-state drives. Profit-taking at these levels probably isn't a bad idea.

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

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.

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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 owns shares of Intel and is also on Twitter as @TheMotleyFool. The Fool's disclosure policy has its eye on you.


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