Max, STVI ESOL owns most of the shares. The insider selling was mostly exersise of options.
SAH has similar problem to the rest of the small caps. Here's a good
article on the subject:
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visit moneydaily.com.
Friday, June 5, 1998
Why small-caps are still suffering
The answer, in many cases, is liquidity - but analysts say the
situation will change soon
Part one of a two-part special report
By Michael Brush
Small-cap stocks rallied Thursday as the Russell 2000 Index tacked
on better than a half a percent to close at 451.74. But by any
measure, these small fry are still in the dumps.
Indeed, investors have been hammering small-cap stocks so badly in
the past month that they're at levels not seen since the bleak
days of last two major market corrections in 1990 and 1987, if you
measure by trailing price-earnings ratios.
As of Tuesday, the average NASDAQ stock was 30% off its twelve-
month high. "There is a lot of blood in the market," notes John
Manley, the chief equity strategist at Salomon Smith Barney.
All this seems odd, if you consider that small-cap stocks --
typically defined as those with a market cap of $1 billion or less
-- offer decidedly stronger earnings growth than their larger
counterparts.
"Small-cap stocks have their best growth to price-earnings ratio
since 1990, while big-cap stocks are grossly overvalued," says
Louis Navellier of Navellier & Associates, which runs several
small-cap funds.
Need some numbers? Consider these. The Russell 2000, a common
small-cap index, is priced at about 19 times forward earnings --
earnings that are expected to grow about 20.6% in the next twelve
months, points out Navellier. The S&P 500, meanwhile, is trading
at 22 times forward earnings, even though those earnings are only
expected to grow by a much lower 10.2% over the next year.
The faster growth of smaller companies is not unusual. They
typically grow more quickly, in part because they are starting
from a smaller base. Sell two units instead of one, and you have
100% growth. And right now, they have the added advantage of less
foreign exposure, meaning they probably won't be hurt as much by
Asia or the strong dollar.
Despite these advantages of faster growth, valuations near
historic lows, and less foreign exposure, investors these days
still look at small-cap stocks as if they were real estate next to
Chernobyl, says L. Keith Mullins, a small-cap stock analyst at
Salomon Smith Barney. Cheap, yes. But no one wants it.
Why are investors paying so much more for large-caps when they're
getting less? It boils down to the deeper liquidity of larger
stocks -- meaning that fund mangers can get in or out of them
without moving prices as much.
"The last place you want to be, in a world where there could be a
crisis at any moment is in an illiquid, small company," says James
Paulsen, the chief investment officer at Norwest Investment
Management. In the last decade, seasoned investors have seen
crises sparked by Asia, Mexico, derivatives, U.S. banks and war in
the Middle East -- and they are wary another problem could strike
soon. They are also on tenterhooks because of worries about the
Fed raising rates or corporate earnings falling short.
Investors know that getting out of the smaller stocks if another
problem breaks out means having to take a big loss -- since their
liquidity is so low. A little selling pressure drives their prices
down dramatically. Indeed, Paulsen thinks that if you adjust the
higher growth of small-cap stocks for their volatility, often used
as a proxy for risk, then the larger companies have a better risk-
adjusted growth rates in the eyes of many investors.
Another reason small-cap stocks are underperforming, points out
Prudential Securities small-cap stock analyst Claudia Mott, is
that a lot of the recent capital inflow to U.S. equities comes
from foreign investors, who tend to go for the big-cap names.
What's more, individual investors have been selling small-cap
funds in favor of bigger-cap funds. "This is unfortunate," says
Mott. "Because they are all going to be cleared out of their
small-cap funds right as those funds are about to rebound. It is
rare that you see this kind of a spread between small- and large-
cap profits."
"The average investor is just chasing last year's performance and
buying the index funds," agrees Navellier. "But every major
strategist is saying: 'Small, small, small.' You just need
something to spark them. I am waiting and very patient."
For a review of some potential catalysts that might rekindle
small-cap stocks and give Navellier some company in the small-cap
end of the market, see tomorrow's Money Daily.
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