It's a new week, which means it's time to check the most interesting insider purchases.
After reading through numerous filings using insider tracking tool Form 4 Oracle, here are my top five.
The week's buying
|
Company |
Closing Price 6/5/07 |
Total Value Purchased |
52-Week Change |
|---|---|---|---|
|
Brookdale Senior Living |
$47.00 |
$14,165,191 |
1% |
|
Genomic Health |
$18.81 |
$4,937,877 |
66% |
|
Green Plains Renewable Energy |
$19.93 |
$78,360 |
(44%) |
|
Sunesis Pharmaceuticals |
$4.23 |
$5,999,991 |
(33%) |
|
Verasun Energy |
$15.23 |
$646,004 |
(49%)* |
*Verasun began trading on June 14, 2006.
Why you might want to sell these buys
Normally, this column profiles stocks you may wish to investigate because of bullish insider buying. Not today. Two extremely interesting situations have me wanting to show you when insider buying might be bearish.
Yes, you read that right: bearish.
Let's begin with the two stocks that make the highlight reel for this exercise. Data is provided by our Motley Fool CAPS investor-intelligence database:
|
Metric |
||
|---|---|---|
|
CAPS stars (out of 5) |
** |
* |
|
Total ratings |
74 |
245 |
|
Bullish ratings |
64 |
117 |
|
Bull ratio |
93.8% |
47.8% |
|
Bearish ratings |
10 |
128 |
|
Bear ratio |
6.2% |
52.2% |
|
Bullish pitches |
20 |
26 |
|
Bearish pitches |
1 |
18 |
Both of these stocks trade high on promises. Verasun is a corn burner. (Or, if you're among the renewable energy crowd, an ethanol producer.) Genomic Health, meanwhile, claims to have come up with a better breast cancer screen.
Verasun is at least producing free cash flow. Genomic Health? Not so much. But each is benefiting from what appears to be generous insider buying. Just not the right kind of insider buying.
Let's start with Verasun. Even though Chief Financial Officer Danny Herron and director Steven Kirby teamed to purchase 45,000 new shares last Thursday, executives as a whole have sold nearly $6 million over the past month. Sales and marketing vice president William Honnef accounted for $5.25 million of that. (I'll get back to why that's important in a minute.)
Genomic hasn't done much better. Just as hedge funds have bought more than $32 million in stock, Chief Scientific Officer Joffre Baker on Friday cashed in a portion of his holdings for more than $81,000.
See what's happening here? At Verasun, the top sales guy -- the one who would know better than anyone how ethanol sales are shaping up -- is selling. At Genomic Health, the top scientist -- the one who would know the merits of the technology better than anyone -- is selling. Who cares who else is buying if these guys are selling?
Remember, Fool, following insider buying is a very soft science. It's nice to see, but as an investor, you'll always be better served by focusing on valuation and competitive advantage.
There endeth the lesson. Thanks for attending. See you back here next week, when we dig through more insider deals in search of the next home run stock.
Get the inside scoop on stocks of all sizes with related Foolishness:
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- A summer sell-off could be in the making.
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Fool contributor Tim Beyers, ranked 3,440 out of more than 29,700 in CAPS, usually favors two scoops of ice cream over the inside scoop. Tim didn't own stock in any of the companies mentioned in this story at the time of publication. Tim's portfolio holdings can be found at his Fool profile. His thoughts on insider buying, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy only stays inside when it has to.
