By Daniel Bases
NEW YORK, March 23 (Reuters) - Insiders at Star Banc (NYSE:STB)
have joined a broad selling trend in the last several weeks,
but some top executives, like those at Bay Networks (NYSE:BAY) have
resisted the urge to sell even as their shares lost value.
For the most part, insiders like those at Star Banc are
leery of the market's upward moves and are selling their shares
even as most investors dismiss earnings warnings and push the
market higher, according to analysts who track insiders.
"The selling is rising dramatically in here. I'm kind of
boggled by the kind of numbers I'm seeing," said Bob Gabele,
President of CDA/Investnet, a research firm that analyzes
corporate filings to the Securities and Exchange Commission.
Selling by insiders, defined as senior corporate executives
who have sizable holdings of their own companies' shares, is
viewed as one tool for analyzing a company's fortunes.
Historically, the ratio of sellers to buyers has been two
to one, according to Gabele's reasearch. The ratio broke out
of the trend lines in the later half of 1997, as more sellers
came into the market.
"Between August and December we have been showing steadily
between three and four sellers for each buyer. The markets
started tanking in late December and into early January and it
went back to historical levels because the buying increased
again," Gabele explained.
"If you're an insider and looking at the market's rise,
you're seeing prices increase not so much because of individual
corporate fundamentals but more because money is just pouring
into the market," said John Manley, the chairman of Salomon
Smith Barney's Equity Strategy Committee.
Insiders on the whole have reacted to the market strength
by selling stocks and raising cash, and their reluctance to buy
stocks is an indication they think market valuations are too
pricey, according to Gabele.
Star Banc is just one of the stocks under selling pressure
in a regional banking sector that has seen particularly hard
selling in the wake of insider share accumulation and rising
stock prices fueled by views the sector is ripe for mergers.
Besides Star Banc, Norwest Corp (NYSE:NOB), and TCF Financial
Corp (NYSE:TCB) are other standouts CDA has identified.
According to CDA, Star Banc saw seven insiders dispose of
194,966 shares in a price range of $54 to $60 a share during
the months of January and February.
High-flying Star Banc Corp is currently trading at 61, just
off its 52-week high of 61-9/16.
"Stock prices of many long-suspected takeover candidates in
the industry have risen to levels that may actually cause them
to be less attractive targets at this time than they appeared
to be at lower prices," he noted.
The higher stock prices might be prompting insiders to take
advantage and sell, rather than wait for a possible merger
proposal, Gabele said, adding: "These situations are especially
interesting to us because they may point to regional banks that
are not engaged in serious takeover discussions at this time."
"It is uncommon to find insiders selling before significant
merger activity." he said.
While insiders at Star have been lightening up their
positions, either selling on the open market or back to the
company, one analyst who follows the Star Banc didn't sound
alarmed.
"This stock is one of the star performers in the industry,
with management owning a lot of the stock," said Joseph Duwan
of Keefe Bruyette & Woods Inc.
"The stock trades at a significant premium and it is less
than likely that Star Banc would be acquired," Duwan said.
A Star Banc official was not aware of a specific reason for
the "disposition" of stock.
While the selling trend has gained momentum in regional
banking and in other sectors, Gabele has been watching
insiders' reluctance to sell at Bay Networks with great
interest for the last several months.
Indeed, insiders and at least two former executives at Bay
Networks, the third largest U.S. computer networking equipment
maker have exercised and held onto their non-qualified stock
options even though they face a tax burden as a result.
As current and former insiders hold onto their shares even
as the stock has sold off in the last five weeks, analysts see
indications the share price will move higher.
"For anybody thinking that Bay might be a 'takeout'
candidate, there isn't anything on the insider activity that
would steer you away from that notion," Gabele said.
Wall Street's reaction was mixed last week when Bay said
third quarter sales would be disappointing. The stock barely
moved after as the market digested the warning, and has even
ticked upward since.
Bay's stock, now at 28-11/16, off from its year-to-date
high of 33-7/8 last month but above the 26-3/4 level the day
the company warned Wall Street of its third quarter fortunes.
Analysts note that while the insider selling has been on
the upswing recently, the data on insider behavior can yield a
broad spectrum of information on different companies.
"You have to keep an eye on it. Every once in a while
you'll get some good nuggets of information on stocks," said
Manley of Salomon Smith Barney.
1717, e-mail daniel.bases@reuters.com )) |
