Morgan, where did you see insiders selling after the stock been beatened up? The last time I saw insiders selling was the Winnick collar and Walsh sales. Was there more selling after this?
My exact statement was:
"Never a good sign, when insiders sell like there is no tomorrow AFTER the stock has already declined by 80%"
By my hopefully not fuzzy math, I recon that from $61 and above to $12.38 and there abouts, where Winnick and Walsh etc. sold, represents selling the stock when it has declined by 80%. So, my statement was justified.
I wouldn't have raised an eyebrow, had they sold at above $60. Or even above $50. Heck, I can see selling all the way to the $30's where they came out with their secondary last year... after all, if they know they are selling shares at in the low $30's to raise capital for the company, clearly, they see anything above that as at least temporarily overvalued.
I start getting concerned when they sell in the 20's, because now they are selling shares below the level at which they raised capital for the company - which is already a decline of 50%. The stock declines further, and they keep selling. In fact, the stock was "beaten up" at the level at which Winnick did his deal, $12.38, which represents a 50% decline from the levels of the January of this year. 50% certainly qualifies as "beaten up", no? Especially that that 50% comes on top of a decline by 60% from the previous year!
The stock hit a low of $8.77 in the April market dip. It then recovered to $15-$16. Boy, that could be interpreted as "the stock hit a low of $8.77 on market conditions, and now has recovered to more reasonable valuations of $15-$16"... only one thing - the insiders took this occasion of a "rebound" as an opportunity to DUMP shares (look at all the sales in May, including Cook's at $11.22, LOL!), thus implying that the "rebound" is to levels WORTH SELLING AT! Sorry, but that screams "lower highs and lower lows", which is in fact what happened. Then Winnick comes up with his collar. You don't strike a collar like that unless you see the bottom quite a ways off. If I buy a put on a stock at $12, I expect a decline to be substantial, rather than to only, say, $10. That told me, that Winnick expected a SUBSTANTIAL decline.
I then ask a simple question: if there is supposed to be a substantial decline from $12.38, then why should I be buying at that level? Look, people thought the stock was cheap when it broke $20 (and even above). Heck, the stock was supposed to be super cheap when it hit a low of $8.77 IN BAD MARKET CONDITIONS of a low in the markets back in April. To then sell the rebound, to me spoke volumes - it said "$12.38 is not cheap in our opinion, but rather expensive". When insiders have such opinions, I listen.
Oh, and it is not just one insider who temporarily needs some extra funds to install a swimming pool on that private 747. I worry when they head for the exits en masse - can it be that ALL have a sudden money emergency? After all, they have enough for groceries, no? So why the unseemly rush to sell? Looks to me like they are selling not because they need to buy junior a pair of shoes or put food on the table, but rather because they expect the shares to lose value, and they'd rather cash in. I don't blame them, but I do watch their hands. That is why over the months, I have made many posts regarding the insider selling - again, not simply the fact of it, but the PATTERN. Hmmmm, and guess what - in paying attention to insider sales patterns, I'm not being some faithless primitive trader - I'm taking advantage of information WHICH THE SEC ITSELF DEEMS VERY IMPORTANT INFOMATION for INVESTORS. They mandated disclosure of insider stock activity for a reason - not because they thought it irrelevant information for faithless traders. They thought it IMPORTANT MATERIAL information for investors. And I agree.
Now, I'm perfectly aware that there can be innocent reasons, and good reasons for insiders selling, and it does not always imply a stock decline expectation from insiders. But sometimes it does. I have my criteria of when it is innocent, and when it implies an expectation of decline, others have theirs. I believed, and stated repeatedly, that in my opinion, in this case, the insider PATTERN of selling, implied an expectation of a decline. Just one data point.
Morgan |
