DD, I can't stand to sell my babies at bargain basement prices. I'm not happy, but I'm holding. Looks like I'll have a tax loss caryover if market conditions continue to deteriorate. I am going to hold the course unless APCO dissapoints. If APCO doesn't buck the gravity pull, I'm a bear. GROWL !!!!!!!!!!!!
Here's some optimism:
For an enhanced HTML version of the Money Daily,
visit moneydaily.com.
Wednesday, July 29, 1998
What those in the know are doing
Despite the market's volatility, company executives
and other insiders have been on a buying spree.
By Michael Brush
moneydaily.com
Investors continued to sell stocks Tuesday, pushing
the Dow Jones Industrial Average down 93 points at the
close. But the insiders are saying, "Buy, buy, buy!"
In contrast to mid-March through mid-May -- when they,
too, were selling heavily -- company executives and
other insiders have been on a buying spree recently,
pushing the so-called insider meters well into
positive territory.
"Our buy signal started three weeks ago," says Michael
Painchaud, research director of Market Profile
Theorems Inc. in Seattle. "It is the third-best signal
we have gotten in the last four years."
"One encouraging factor I am seeing is that insiders
are exercising a lot of options, but they are not
turning around and selling," says David Coleman, a
money manager who uses insider trends to invest at
Watershed Investments in Washington, D.C. "They are
holding on."
The positive signal from the insider camp does not
mean there won't be more volatility in the near term.
Most likely, there will be. But in the longer term,
the insiders are bullish. And they are worth listening
to because very often they get it right.
Among the sectors that stand out as showing decent
improvement are energy stocks, especially the oil
drillers. Global Marine (NYSE: GLM) is particularly
strong, says Painchaud. David Cuneo of Vickers Weekly
Insider sees strength in Real Estate Investment
Trusts, land development, real estate and diversified
utilities. Coleman says medical services companies are
showing some solid buying.
On the down side, Cuneo says there is weakness in
electronics and electrical stocks, including
technology-related firms and personal computer makers.
Other sectors showing some weakness include
advertising, aerospace, auto and truck manufacturing,
and
railroads.
The insider analysts say they also see some weakness
in two sectors that have been red hot: banking and
retail. But many companies in those areas will
continue to have strong earnings, they point out.
One of the curious things, Cuneo says, is that the
insiders are sending the weakest buy signals for the
stocks that are doing the best: the more liquid large
cap, blue chip issues.
Likewise, the smaller cap stocks and turnaround plays
-- the ones that are suffering because they are being
ignored by institutions and individual investors alike
-- have the strongest insider buy signals.
Of the 30 Dow stocks, only Coca Cola (NYSE: KO) and
Travelers (NYSE: TRV) are sending off positive
signals, notes Cuneo. And the one from Travelers is
pretty weak. All the other Dow stocks have sell
signals, led by General Motors (NYSE: GM).
There may be two reasons why insider buying is so weak
at the blue chip companies, Cuneo suggests. First,
these stocks are up so much, many of them have
probably reached targets that make more stock options
available to executives. "So why buy shares when
you are about to get a ton of stock dumped on you
anyway?" Second, insiders may be thinking that as long
as their shares in their companies have gone up so
much, what is the value of "topping off the tank" by
buying more? "It's far more likely you will take some
profits," says Cuneo.
Despite the strong buy signal from the insiders' camp,
there are good reasons to be cautious about this
market. Annual earnings growth has been slowing down,
valuations are high, and technical factors are weak.
The number of advancing stocks is too small,
compared to the number in decline, for example.
"I would like to see confirmation in other things,"
says Painchaud. "I would like to see earnings growth
pick up, the advance-decline line pick up, or interest
rates lower," At the very least, he says, interest
rates better not start moving up.
"I would not be surprised to see the correction
continue," says Coleman. "The depth of the buy signal
has not been as strong as it has in the past. But
longer term, things are bullish." |
