Archie's Corner

[timhyma]

EZ2, this still relevent?

Posted by: EZ2
In reply to: None Date:3/9/2002 9:30:57 AM
Post #of 29467

00:43 BARRON'S: Anticipation Act: When Inside Sellers Lead Buyers, 3:1, Beware
By Allison Krampf
Good times have returned to Wall Street as fears of terrorism fade and hopes
for an economic recovery grow.
The Dow Jones Industrial Average is up 27% from its September 2001 low, while
the Standard & Poor's 500 has risen 19% and the Nasdaq Composite index has
gained 31%.
But as stocks have rallied, their valuations have gotten richer, too. And many
corporate insiders -- executives and members of boards of directors, who
presumably know their businesses best -- have quietly unloaded lots of shares
and locked in their profits while other investors hopped aboard for the ride.
In the first two months of the year, insider selling by corporate executives
and directors outpaced buying by 3 to 1, according to Vickers Weekly Insider
Report. "Trading activity indicates that insiders continue to sell stock at a
seemingly relentless pace," the newsletter wrote last week.
That's vastly different from last October, when insiders bought while many
stocks plunged to 52-week lows. "October was the first bullish month since
November 1999," says Jonathan Moreland, director of research at
InsiderInsights.com, a weekly newsletter and Website detailing insider trading
activity.
Moreland notes that more often than not, heavy insider selling means that
stocks have had a big run. "A lot of the big-name technology stocks that have
bounced back solidly after September 11 are experiencing a large degree of
selling," Moreland adds.
Insiders sell for many reasons, from mandatory exercising of options to buying
a house or boat. "It is similar to cashing a paycheck," says Vickers editor
David Coleman.
Besides the blue-chip tech names, stocks that have shown an increase in
insider sales are often those that have rallied ahead of an economic recovery,
such as newspapers and restaurants.
Applebee's International is another highflying company where some insiders
have headed for the exits. The Overland Park, Kansas-based restaurant chain,
which operates casual-dining restaurants under the name Applebee's Neighborhood
Grill & Bar, has risen 77%, outperforming the Dow Jones Restaurant Industry
Group by about 65 percentage points over the last year.
But in the past six months, 18 insiders have sold 812,000 Applebee shares,
worth some $26 million, says ThomsonFN.com. Lloyd L. Hill, chief executive
officer and chief operating officer, sold roughly 37,400 shares worth more than
$1.5 million.
Carol DiRaimo, Applebee's director of investor relations, says that stock
options are part of the company's compensation strategy and "as the stock
appreciates, officers want to take advantage of it."
Late last week, the stock was selling at 36.66, about 4% off its 52-week high
of 38.11, hit at the end of January.
Applebee's earnings are expected to grow by 17% this year, to $2.11 a share,
and by 14% next year, to $2.41 a share, according to First Call.
Meanwhile, Cincinnati-based E.W. Scripps, which operates both newspapers and
television networks, has had a nice run along with many of its peers.
Anticipation of a rebound in advertising plus speculation about more
consolidation among media companies has pushed E.W. Scripps, which has a $6
billion market capitalization, to new highs.
Over the past year, the stock has gained 18%, outperforming the Dow Jones
Publishing and Printing Industry Group index by 11 percentage points, according
to Thomson Financial/Baseline.
But seven Scripps insiders have sold shares in the past six months, including
Chief Executive Officer Kenneth W. Lowe, who sold roughly 31,000 shares worth
$2.07 million.
Insiders sold almost 164,000 Scripps shares altogether, for a total of almost
$6.6 million, reports Thomson FN.com Financial Network. Tim Stautberg, Scripps'
vice president of communications and investor relations, says the executives
sold to diversify their personal holdings.
The stock looks pricey, however. Last week it changed hands at 76.07, near its
all-time high.
Scripps' earnings are expected to grow by 34% this year, to $2.41 a share and
by 14% next year, to $2.75 a share, according to Thomson Financial/First Call.
It is currently trading at 31.7 times this year's earnings estimates, more than
double its 13% projected long-term annual earnings growth rate.
It also is selling at a hefty premium to its median P/E of 24.8 times forward
earnings for the last five years, according to Baseline.
Vickers' Coleman points out that recent data indicate that insider selling may
be slowing.
That could mean that insiders are confident again -- or they've done all the
selling they wanted.
Whatever -- but all these sales have got to raise caution flags for investors
who are just getting ready to jump into the water again.
---
For Barron's subscription information call 1-800-BARRONS ext. 685 or inquire
online at http://www.barronsmag.com/reader.html.
(END) DOW JONES NEWS 03-09-02
12:43 AM- - 12 43 AM EST 03-09-02