If you're thinking of selling your stocks, you're not alone. According to insider tracker Form 4 Oracle, executives at these three firms cashed in shares last week:
The week's selling
Company |
Closing Price 2/5/09 |
Total Value Sold |
52-Week Return |
---|---|---|---|
EMC |
$11.77 |
$6,519,293 |
(24.2%) |
NVR |
$397.73 |
$33,355,861 |
(35.5%) |
Steel Dynamics |
$12.69 |
$22,767,028 |
(47.4%) |
Sources: 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 Morningstar
Firms typically find their way here because those selling either (a) exhibit good timing, or (b) are dumping significant portions of their stakes. So when Steel Dynamics board member John Bates sold off roughly 47% of his direct holdings in the company this week and last, I got curious.
As a co-founder, Bates has unique insight into the operations of Steel Dynamics. He's also been a director since 1993 and is the president and CEO of Heidtman Steel, the single largest customer of Steel Dynamics' products. Does he have reason to believe demand will slacken further?
Could be. Steel Dynamics has had a difficult time turning a profit. The company reported a fourth-quarter net loss of $82.7 million, or $0.45 per share, down from last year's $0.50-per-share profit. Revenue fell 17%. Yuck.
EMC = sales
I find Bates' selling troubling, but he's also just one guy. On the other hand, several of EMC's executives are selling.
Insiders don't have a huge stake in the company -- less than 1%, according to Capital IQ. But four executives cashed in more than $6 million in stock this week. Human resources vice president John Mollen sold 18% of his direct holdings. Storage division president David Donatelli sold nearly 25% of his stake. And general counsel Paul Dacier dumped 100,000 shares.
The timing is troubling. EMC, like Cisco
Fair enough. Tough times demand disciplined management. Still, is it fair for top executives to be cashing in so much stock as others collect pink slips? It doesn't feel right.
But don't tell that to our 125,000-strong Motley Fool CAPS community. They love EMC:
Metric |
|
---|---|
CAPS stars (5 max) |
***** |
Total ratings |
2,964 |
Percent Bulls |
95.6% |
Percent Bears |
4.4% |
Bullish pitches |
47 of 501 |
Data current as of Feb. 6, 2009.
Even those who don't like the business all that much, like CAPS investor ironcowboy, still see the stock outperforming the S&PÂ 500. Quoting from this Fool's late December pitch:
EMC has historically underperformed the S&P 500, Why? Until it develops an advanced new product(S) and clearly establishes itself as a true leader in that niche, it will continue to track just above the S&P 500. It will likely outperform due to business demanding better computer systems infrastructure, and emphasis on more automated systems.
I'd love to believe that. Management's selling tells a different story.
There's your update. See you back here next week for more stocks you might want to avoid.
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