At least management sees the value...:
What Are the Insiders Up To? How to Find Out: John Dorfman
<<<Boston, Dec. 7 (Bloomberg) -- In stock trading, the party with the better information will usually win. One type of information I think is especially useful is knowledge about trades by company officers and directors. If they're heavy buyers of their own company's stock, I may want to be a buyer, too. If they're heavy sellers, rarely will I want to buy.
Here are eight sources of information on insider purchases and sales:
-- Vickers Weekly Insider is a newsletter published by Argus Research Corp. in New York (800-645-5043). It has achieved an average five-year return of 21 percent through June 30 on its four recommended portfolios, according to Hulbert Financial Digest, a newsletter that keeps a scorecard on investment newsletters.
-- The Insiders is a newsletter published twice a month by the Institute for Econometric Research in Deerfield Beach, Florida (800-442-9000). It has achieved a five-year annualized return through June 30 of 19 percent.
-- CDA/Investnet Insiders' Chronicle is a newsletter published weekly by CDA Investment Technologies in Rockville, Maryland (800-243-2324). Hulbert does not track it.
-- Jack Adamo's Inside Track is a newsletter published in Potomac, Maryland (800-211-6361). As of June 30, Hulbert had tracked it for only six months. During those six months, its recommendations were up 13 percent, which beat the Wilshire 5000 index, a broad market measure that Hulbert uses as a benchmark for U.S. stocks.
-- Primark Corp. of Waltham, Massachusetts, recently opened a Web site called InsiderScores.com. It evaluates insiders according to how foresighted they have been with their trades in the past, then tries to track the trades of the most prescient among them.
-- Individual Investor Group Inc., of New York, owns Insidertrader.com, a Web site that says it has 2,500 subscribers and 100,000 users per month.
-- The Wall Street Journal publishes a table each Wednesday in Section C titled ``Insider Trading Spotlight.' It provides information for a 12-week and 24-week period on companies that have filed insider reports with the Securities and Exchange Commission in the previous week.
-- If you have access to a Bloomberg terminal, you can find information about insiders' trades by typing the company's stock symbol, followed by country code, and DES4 or CN WSA.
No doubt there are other good sources in addition to these eight. I welcome feedback from readers, whether they are professional investors or not, on which sources of information they have found to be most useful.
SEC Filing Requirements
All of these sources ultimately get their information from filings with the Securities and Exchange Commission. By the 10th of each month, corporate officers, directors and major shareholders (people who own more than 5 percent of a company's stock) are required to file their trades for the preceding month. Thus, the information is usually between 10 and 40 days old when it becomes public. (Late filings are common and early filings are rare.)
Most of the newsletters have their own proprietary scoring system for interpreting insiders' activity. For example, The Insiders considers buys more significant than sales, and open- market purchases more important than option exercises or private trades. It gives extra weight to a trade if it involves a top executive, if it involves a large number of shares, or if there is unanimity among several buyers or sellers. It considers new positions less significant than changes in established positions. Then it rolls together all these elements and gives each stock a score ranging from zero to 10.
Here are a few stocks that are among those with the most insider buying or selling in the past six months.
REIT Executives Buying
United Dominion Realty Trust Inc. is a real estate investment trust with headquarters in Richmond, Virginia. Its specialty is apartment buildings. In July, insiders purchased the most shares they had in a decade, $3.4 million worth. Most of that buying came with the stock at about $11.50. In October, there was another wave of buys by several officers and directors at around $11. President John S. Schneider sold some shares in November, but it was a small portion of his holding.
The stock closed yesterday at $10.31, which is 21 times earnings, 1.8 times revenue and 1.2 times book value. Because the price/earnings ratio is 21, the stock isn't on my buy list; but it may be of interest to investors who aren't as cheap as I am.
Tricon Global Restaurants Inc. (the stock symbol is YUM) operates the 30,000 fast-food restaurants formerly owned by PepsiCo Inc. -- KFC (Kentucky Fried Chicken), Pizza Hut and Taco Bell. Since the company was spun off in September 1997, its insiders have bought an average of $1 million of its stock each month. There have been no filings in the past 45 days, however, according to The Washington Service, a unit of Brick Securities that provides insider data on the Bloomberg system.
Office Depot Buyers
At Office Depot Inc., nine officers and directors bought stock in September at prices ranging from $9.94 to $10.88. The stock, which was near $25 when the year began, closed yesterday at $10.06. In mid-September I wrote in a column that I was ``very tempted' by the shares, but wanted to see some insiders buying before I would bite. I don't see much reason to wait any longer. The stock is at 11 times earnings, 1.8 times book value and 0.3 times sales.
At Sun Microsystems Inc., which has soared to $146.50 from $42.81 this year, four vice presidents sold significant portions of their holdings in October. And recent filings indicate that more selling is to come. I used to own Sun shares but wouldn't go near them at today's valuation. The stock fetches nearly 98 times the past four quarters' earnings and 83 times estimated earnings for the fiscal year that ends in January.
In the past 45 days, filings indicate that insiders at Dell Computer Corp. have sold $264 million worth of stock, according to the Bloomberg database. With the stock at 66 times trailing 12- months earnings and 61 times estimated earnings, I for one don't blame them.
Dec/07/1999 10:20
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