Insiders Sell Stock at Pfizer and Auto Companies: John Dorfman
Bloomberg News
June 25, 1998, 11:43 a.m. PT
Insiders Sell Stock at Pfizer and Auto Companies: John Dorfman
(John Dorfman is a Boston-based money manager with Dreman
Value Management LLC in Red Bank, New Jersey. The opinions
expressed are his and don't represent those of Bloomberg LP or
Bloomberg News. His firm or its clients may own or trade
investments discussed in this column.)
Boston, June 25 (Bloomberg) -- Pfizer Inc. stock doubled in
the past nine months, mostly because of investor enthusiasm for
Viagra, the potency drug. Lately, several Pfizer executives
decided to take some profits.
That's one of several highlights from a review of recent
buying and selling by so-called insiders -- that is, corporate
officers, directors and major stockholders. These folks, who have
knowledge of a company that goes way beyond that of an average
investor, must report their trades to the Securities and Exchange
Commission monthly. Smart investors watch the filings for clues
to various stocks' outlooks.
Among other well-known companies that show heavy selling
recently, according to the Vickers Weekly Insider report, are
General Motors Corp., Chrysler Corp., and Warner-Lambert Co. By
contrast, Vickers reports strong insider buying at several little
banks, including Cavalry Bancorp Inc., Stewardship Financial
Corp., and Staten Island Bancorp.
Vickers's insider-trading rankings take into account the
number of buys and sells at each company in the past six months,
the percentage change in holdings, unanimity among a company's
insiders (or lack of it), and the dollar value of the trades.
There are bonus points for ''reversals,'' when insiders go from
bearish to bullish or vice versa. (Vickers is in Huntington, New
York. Its rankings are published by Argus Research Corp. of New
York City.)
Pfizer
At Pfizer, Chairman and Chief Executive William Steere Jr.
sold 80,000 shares for about $8 million in April. A few days
later, with the stock up $12, to $112.39, Henry A. McKinnell Jr.,
executive vice president, sold 73,872 shares for about $8.3
million. (The figures, based on SEC filings, come from Washington
Service, an insider-trading information organization affiliated
with Brick Securities in Washington. The company wouldn't confirm
or deny them.)
In addition, 12 Pfizer vice presidents sold some shares in
April, according to Washington Service. The amounts ranged from
7,7000 to about 40,000 shares. For most of the sellers, the
shares sold were acquired through stock options at prices far
below the current price.
According to the Bloomberg database, the $49.7 million of
Pfizer stock sold by insiders this spring was a record. (The
tally uses a series of 45-day periods and goes back to 1985.) In
a normal period, Pfizer insiders sell about $3.6 million worth of
shares.
A Pfizer spokesman said the company makes it a policy not to
comment on personal trading.
Pfizer is a swell company, with or without Viagra. But just
because it has a sexy new product, there's no reason in my view
why Pfizer should sell at a significant premium to Merck & Co. or
Bristol-Myers Squibb Co. Yet it does. Pfizer stock sells for 61
times the past four quarters' earnings, compared to 33 for Merck
and 35 for Bristol-Myers Squibb.
Autos
In the auto industry, both General Motors and Chrysler
showed high selling indexes in the Vickers system. General Motors
insiders sold $15.4 million worth of stock recently, up from an
average of $1.8 million in a normal period, the Bloomberg
database indicates. Ten GM executives have sold shares since the
beginning of February.
A GM spokeswoman notes that the two largest sales were made
not by auto executives but by executives of GM's Hughes
Electronics affiliate, and that one of those two individuals just
retired. She says that all of GM's top executives are required to
hold at least one year's salary in the form of GM stock, so that
the executives' interests are aligned with those of shareholders.
One reason for the recent selling, she adds, is that GM has
achieved some of its performance goals, boosting the stock. (It
is up 33 percent in the past 12 months.)
21 Chrysler Execs
At Chrysler, 21 executives sold shares since the beginning
of February. Chairman Robert A. Lutz sold the largest number of
shares, unloading 180,000 and keeping 168,866.
A Chrysler spokeswoman noted that Lutz is retiring July 1.
Some insider selling is to be expected, she said, because
Chrysler executives are compensated in large part with stock.
When they do sell, she said, ''frequently it is for portfolio
diversification.''
Vickers's rating on Ford Motor Co. is neutral. Executives
and directors have done a mixture of sales and purchases.
With all of the car companies, one important question is,
how deep into the economic cycle are we? Auto companies always
claim that they have lowered their break-even points so that they
will stay marginally profitable in the next recession. Comes the
next recession, the red ink flows like soda.
Still, the car stocks are attractively cheap. GM sells for
less than nine times estimated 1998 earnings, while both Ford and
Chrysler sell for less than 12 times 1998 estimates.
My firm owns some Ford shares. Personally, I also like
Chrysler. I would avoid General Motors because it has been losing
market share in recent years to Ford, Chrysler and the imports.
Small Banks
There hasn't been much dramatic insider buying in big, well-
known stocks lately. However, officers and directors at some
small banks are showing a healthy appetite for their companies'
shares. At little Cavalry Bancorp in Murfreesboro, Tennessee,
insiders gobbled up $10 million of stock following the company's
initial public offering in March. At Stewardship Financial in
Midland Park, New Jersey, nine insiders have nibbled at the stock
since Christmas.
At Staten Island Bancorp in Staten Island, New York (parent
to Staten Island Savings Bank), there was a burst of insider
buying by 15 officers and directors six months ago when the
company first came public. Unless there is another flurry soon,
the bank will drop off Vickers's leader board shortly. The
organization has subpar profits, but sells for only 1.3 times
book value, which might make it a takeover target.
--John Dorfman (617) 964-2026 through the New York newsroom.ltk
|
