U.S. Insider Purchases Almost Triple After Share Prices Plunge
By Steve Matthews
New York, July 14 (Bloomberg) -- U.S. executives and directors purchased $3.72 billion of shares in their
companies in the first half, almost triple a year earlier, as stock prices fell to five-year lows.
Western Wireless Corp. Chief Executive Officer John Stanton and Juniper Networks Inc. director Richard
Kramlich were among the biggest buyers, acquiring shares after prices plunged in the past two years,
according to the Washington Service, which tracks insider buying and selling. Officers and directors
purchased $1.34 billion in the same period of 2001.
The proportion of buyers has been greater in stocks in the Nasdaq Composite Index, which has lost
almost three-quarters of its value since March 2000. Shares have dropped low enough that some
executives are finding stocks too cheap to pass up, even as corporate profits were little changed last
quarter after falling five straight quarters.
``It is pretty bullish sign,'' said Bob DiBraccio, senior vice president for Delaware Investments, which
manages $87 billion. ``Insiders at healthy corporations know there will be a significant upturn in earnings.
When the recovery starts, it's not going to be a stretch to see a lot of stocks recover petty sharply.''
Sales by insiders fell 27 percent to $20.2 billion, according to the filings with the U.S. Securities and
Exchange Commission. Investors say the decline largely reflects the 24 percent drop in the Standard &
Poor's 500 index in the past year.
Buyers
Some executives believe their shares are good values, said investors.
``We always like to see management invest in companies we own,'' Paul Gray at Kensington Investment
Group, which manages $650 million. ``If the sector is cheap and management is buying stock, it's an
affirmation. We pay attention.''
The profits of companies in the Standard & Poor's 500 Index fell 0.5 percent in the second quarter,
according to analysts surveyed by Thomson First Call. Because most companies slightly beat estimates,
the research firm projects earnings rose by about 3 percent in the quarter. Analysts are forecasting a 16
percent rise in the current quarter.
The biggest buyer was Equity One Inc. Chairman and Chief Executive Chaim Katzman, who acquired
170.5 million shares for $2.29 billion in the real-estate investment trust in North Miami Beach, Florida.
``We really believe in the company and feel comfortable buying the stock,'' he said in an interview. ``The
company has a strong future and great dividend yield.''
Spending Rebound?
Shares rose 15 cents to $13.75 Friday, indicating a dividend yield of 7.9 percent. Equity One has risen
less than 1 percent this year.
Juniper director Kramlich's venture-capital firm bought 3 million shares of the networking-equipment
maker for $30.4 million, expecting customer spending to rebound next year.
``We have continued confidence in Juniper management (and) its financial resources,'' Kramlich said in a
statement.
Shares of Sunnyvale, California-based Juniper had dropped 59 percent this year and have lost 97 percent
of their value since trading at $244.50 in October 2000. Friday, the stock rose 48 cents to $7.70.
Western Wireless's Stanton paid $25 million for 4 million shares of the western U.S. cellular phone
company. He didn't return a call for comment.
Shares of the Bellevue, Washington-based company have lost 88 percent of their value this year. The
shares rose 10 cents to $3.38 a share Friday.
Pace of Sales
By some measures, insider selling remains at high levels. There were almost four sales for every purchase
among stocks in the New York Stock Exchange in the eight weeks ended July 5, compared to a typical
ratio of 2.25 to 1, according to Vickers Weekly Insider Report.
Among Nasdaq issues, there were 1.8 sales for every purchase, less than the typical 2.5 ratio, said David
Coleman, editor of the publication. Purchases topped sales in the last reported week. Nasdaq issues'
selling typically is higher than New York issues because ownership by founding executives is much
higher, he said.
``The Nasdaq market has shown the highest rate of purchases, said Coleman. ``When there is an advance,
the Nasdaq is likely to lead the market.''
The Nasdaq index has fallen 30 percent this year, compared to a 13 percent decline for the Dow Jones
Industrial Average. It traded as high as 5132.52 in March 2000.
Microsoft, USA Interactive
Microsoft Corp. officials lead insider sales in the first half, as they have for the past six years. Shares of the
largest software company have fallen 22 percent this year.
Founder Bill Gates reported sales of $617.6 million, topping all sellers, according to the Washington
Service. Gates has a regular program in which he periodically sells a small fraction of his Microsoft holdings
to diversify his investments, said Caroline Boren, a company spokeswoman.
USA Interactive director Paul Allen, who founded Microsoft along with Gates, sold $568.7 million in stock
of Barry Diller's electronic-commerce company.
``We've been focusing on our cable investments,'' said spokesman Michael Nank of Allen's Vulcan
Ventures. ``Since the sale of USA's cable networks Vivendi, the stake was no longer strategic.''
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