Looks like insider buying within the sector may be in an early phase of getting started ...
+++++++++==
Technology Insiders Becoming Bullish
By Kevin Schwenger
December 19, 2000
During October, insider sentiment across all industries became
significantly less bearish compared to previous months. Whereas
executives had sold approximately $26.00- and $21.00-worth of shares in
August and September, respectively, for every $1.00 they acquired, this
ratio fell to just over $6.00 sold for every $1.00 bought in October--the
most bullish this indicator has been in two years. While the dollar value of
shares sold declined in October, the dollar value of purchases rose to $321
million, its highest level since February.
The technology sector has been especially hard-hit over the last nine
months. A December 14th earnings warning by Microsoft Corp. (MSFT )
has heightened concerns that a sector rally may not be imminent. In fact,
Wit SoundView analyst Arnie Berman called the announcement a
"watershed event" because of Microsoft''s past financial predictability.
Microsoft''s chief financial officer, John Connor, notes that the company is
being impacted by weakened global economic conditions that are slowing
not just PC sales but also corporate spending for technological goods and
services in general.
During recent months, technology insiders have started acquiring shares.
Although this activity can be described as "nibbling" in most cases--we
have yet to see widespread consensus buying in this sector--it hints that
sentiment is more bullish overall than in the recent past. Purchasing
activity at some of the largest technology companies throughout the sector
has particularly intrigued us.
In the PC space, Apple Computer Inc. (AAPL ) has experienced a 70
percent decrease in the price of its shares since the year began. A
late-October purchase of 80,600 AAPL shares by Director Arthur
Levinson was the first insider addition there in three years. With a market
value of $1.6 million (he bought at prices between $18.81 and $20.34), Mr.
Levinson''s trade was also the largest addition by an Apple insider to date,
and occurred when the stock was down significantly from its March high of
$75. AAPL shares subsequently slid to a 52-week low of $14.00 on
December 6.
In the domestic long distance market, WorldCom Inc. (WCOM ) is the
nation''s No. 2 player. WCOM shares currently trade at $17.12, down
approximately 65 percent since the end of 1999. The stock actually hit a
three-year low of $14.25 on December 5. First Team All Star Director
Francesco Galesi (Buy Score 95) picked up 127,650 WCOM shares
between November 3-17 at prices ranging from $15.88 to $18.13. This
primarily direct transaction was the first insider purchase here since
March 1999. Mr. Galesi has been perfectly successful in predicting an
upswing in the value of WCOM shares with his previous five additions--in
the six months following those trades, the stock bounced back by an
average 57.8 percent.
Motorola Inc. (MOT ), the world''s No. 2 mobile phone manufacturer, had
two insiders buying a combined 7,250 shares in mid-October at prices
between $20.38 and $22.50. Directors Judy Lewent and Ronnie Chan
increased their holdings by 5,000 and 2,250 shares, respectively. These
were the first executive purchases at Motorola in six months, and the first
consensus buying here in more than two years. At the time of these trades,
MOT shares had declined 65 percent from an all-time high of $61.54 in
March. The stock is currently down 60 percent for the year, after
rebounding from a two-year low at the $15-level set on December 7.
Lam Research Corp. (LRCX ) is a semiconductor equipment maker whose
products are used by many major computer chipmakers. Its stock has shed
60 percent of its value this year. Director Grant Inman picked up 10,000
LRCX shares on October 18 at $16.68. Mr. Inman himself had made the
most recent prior addition at the company two years earlier. LRCX shares
set a 52-week low at the $13-level when the most recent buying occurred,
after trading as high as $56.81 in April. At its current price of $15.31, the
stock is down slightly from that level at which this insider traded.
At Adaptec Inc. (ADPT ), a maker of computer-networking devices, its
chief operating officer, Robert Schultz Jr., picked up 4,750 shares on
October 30 at prices between $14.56 and $14.63. (Chief Financial Officer
David Young subsequently picked up 600 shares in November at prices in
the $13.00 to $15.00 range.) Adaptec executives had previously not
increased their holdings on the open market in more than a year--in fact,
Mr. Schultz himself made the most recent prior purchase in September
1999. His most recent transaction, worth $69,400, is the largest addition by
an ADPT executive in over two years. At their current price of $8.94, a
two-year low, ADPT shares are down 80 percent year-to-date.
The recent buying may be a prelude to a recovery in the coming months as
insider''s often purchase shares when they believe the market is
undervaluing their company''s shares. However, with many tech stock
prices down so significantly, we would like to see a greater number of
executives stepping forward to increase their holdings at what appears to
be potentially bargain prices. |
