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 companies cashed in shares last week:

The week's selling

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle.

Insiders sell for many reasons, ranging from compensation to estate or tax planning to just plain getting out, but the reasons are rarely (if ever) given. Having said that, these are open market sales, made by executives who have 100% control over the timing of their trades. Not so at Netflix (NASDAQ:NFLX) and Heartland Payment Systems (NYSE:HPY), whose insiders have mostly been cashing in on a predetermined schedule known as a 10b5-1 trading plan.

Companies typically find their way here because those selling either (a) exhibit good timing or (b) are dumping significant portions of their stakes. So when Charles Peters, chief financial officer of Red Hat, dumped 23% of his holdings last week -- essentially repeating a very profitable sale he made in April -- I took notice.

There reasons to like Red Hat, of course. An excellent earnings report in a lousy environment, for one. But the leading Linux distributor hasn't inspired an ownership culture among insiders. They own less than 1% of the outstanding shares, according to Capital IQ (a division of Standard & Poor's).

Hunt somewhere else if you want a winner
Executive owners at J.B. Hunt, with a 34% stake in this trucking business, are more committed -- unless you count recent selling. Johnelle Hunt, the widow of company namesake J.B. Hunt, has sold more than $40 million worth of stock since the beginning of December.

It's unlikely that many in our 125,000-plus Motley Fool CAPS community are surprised. Several of them see truckers like Hunt giving way to railroad operators such as Canadian National Railway (NYSE:CNI) and Union Pacific (NYSE:UNP).

Union Pacific, in particular, is interesting because superinvestor Warren Buffett owns shares. Railroads are also the cheapest way to transport coal, argues Foolish colleague Christopher Barker. CAPS investor skifree99 agrees. Quoting from his June pitch:

Trucking is an energy intensive industry which can be, in part, substituted by rail. Recent expansion of oil production by Saudi Arabia will be in the long run trivial and will not lead to any significant reduction in diesel costs. This is a tough industry to be in now. I'd expect some kind of shake out soon.

So do his peers:

Data current as of Jan. 2, 2009.

All-Stars especially expect some kind of shakeout. Only 55% of our best stock pickers like J.B. Hunt to outperform, versus more than 70% for the rest of the community. They know something. Perhaps the same thing that Ms. Hunt, the seller, knows.

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:

• Find out which executives were selling last time.
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• For most stocks, this isn't the time to be selling.

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