Insider buying continues to drop in Feb, lowest level in 5 years
NEW YORK, March 21 (Reuters) - Company insiders buying their own stock fell for the second-straight month in February,
touching a new five-year low and reflecting increasing worries about a slowing economy and corporate profits.
Purchases by executives of stocks of the companies for which they work fell once again to $144 million in February from $150
million in January, said Lon Gerber, director of research at Thomson Financial Networks' unit insiderSCORES.com, a Web site
that tracks such purchases. Insider buying stood at $313 million in December.
The February number is the lowest since September 1995, when insiders bought just $115 million of stocks, said Gerber.
Investors view the aggregate level of buying by insiders -- who have the best access to information on their companies' prospects
-- as an indicator of market sentiment. Insiders presumably buy shares when they consider them a bargain relative to their
companies' future business.
The drop in insider buying means ``what insiders are seeing is that their businesses' fundamentals are deteriorating in the first
quarter,'' said Larry Baumgartner, a portfolio manager with the One Group Small Cap Value Fund, which has about $320 million
in stocks.
Insider purchases included the stock of LSI Logic Corp. (NYSE:LSI - news), SAFECO Corp. (NasdaqNM:SAFC - news),
Apple Computer Inc. (NasdaqNM:AAPL - news), Dominion Resources Inc. (NYSE:D - news) and Monsanto Co.
(NYSE:MON - news).
LSI Chief Executive Officer Wilfred J. Corrigan's purchase of 20,000 shares at $5.35 million in Jan. 30 is noteworthy, Gerber
said, because in the past, Corrigan has bought LSI shares 11 times and on average, the shares were up 53 percent in the next six
months.
Though LSI shares have lost more than 20 percent after Corrigan bought stock this time, there are five months to go for Corrigan
to hit his average return. Most other stocks also went down with the market after insiders bought their shares, Gerber said.
The continuing lack of buying in February is ``somewhat surprising considering the current level of the market,'' said Gerber. ``You
would think there are bargains out there and companies' executives would take advantage of it.''
The Standard & Poor's 500 Index, a broad gauge of the market, has fallen 14 percent in 2001.
Insider selling rose to $4.2 billion in February from $3.7 billion in January, Gerber said.
insiderSCORES.com would have expected insider selling -- sales by executives of stocks of the companies for which they work
-- to decline in February ``if insiders expected market conditions to improve in the near term,'' said Gerber.
``While insiders saw their companies' fundamentals deteriorate, shares of many stocks other than tech have had a good run for four to six months,'' said One Group's
Baumgartner. ``They have a good reason to sell their shares in the short term.''
insiderSCORES.com's favor market indicator -- the ratio of dollars sold to dollars bought by insiders -- rose to 29.1 in February, its highest and most bearish level
since the Web site began measuring the indicator in January 1996, according to Gerber.
Last year the indicator reached highs in February and August, preceding a market correction in the ensuing months.
Gerber expected to see an increase in insider buying in March as the market drops while insider selling should stay unchanged or drop a little.
One Group's Baumgartner though, was more skeptical. ``Insiders won't buy again until they see the economy improves or the market has bottomed out, said
Baumgartner. ''I expect that to happen in the second half of the year." |
