Summer woes silence insider action
A summer slump and trouble in the technology sector has kept the lid on insider transactions. It's not that there aren't any interesting cases--just at the moment, they are harder to find.
The flow of insider filings slowed to a trickle during the month of July, adding up to the lowest monthly total of 1999.
Insider transactions almost always decrease during the summer months as executives skip town and head for the beach. However, this year there is also a healthy dose of market caution thrown into the mix. Despite gains in the broader averages, many technology stocks have been in a steady retreat since April.
Much like the average investor, many technology insiders appear confused about their next moves. Even the market's "expert" strategists are soundly divided on where the bottom may be for this current slide. Extreme selling pressure still exists, despite the market being "over-sold" on a short-term technical basis.
The uncertainty of Y2K, while not at the front of most investors' minds, is also weighing on the market's performance. Contrast this with last October, when insiders were buying shares at record levels after September's severe correction. It was much clearer then that the market had worked through its correction--and insiders who went bargain hunting were rewarded with stellar results from November through March.
Although tech insiders aren't buying with any conviction, they are not selling aggressively as well either. Despite the low number of total transactions, the ratio of insider sells to buys is right in line with historical levels. Sure, there are pockets of the market where insiders are cashing in their chips for handsome profits. The electronics retailers stand out based on high levels of insider profit taking at Best Buy, Circuit City, and Tandy. This has been one of the hottest sectors of the market, as stocks have benefited from strong consumer demand for new products such as digital cameras and DVD players.
One area where the stocks have suffered and insiders have still elected to sell is the enterprise resource planning (ERP) software industry. Insiders have sold shares of industry leaders such as PeopleSoft, J.D. Edwards, and Compuware--all at prices well off their annual highs. Many of these companies have experienced a drop off in demand for their Y2K-related services, while also watching market demand shift from back-office products to e-commerce business-to-business applications.
One interesting case is Juniper Networks, where two insiders purchased 150,000 shares at $149. One of the buyers was the firm's director, William Hearst III. Juniper, a late-May IPO and darling of the analyst community, provides high-bandwidth routers that accommodate high-speed Internet traffic.
Juniper competes with another relatively successful company you may have heard of--Cisco Systems. Juniper is that rare case where insiders are buying shares in the open market (at substantially higher prices than the offering price) shortly after the company has gone public. Typically, top executives and directors sit on large stakes and wait for their opportunity to sell shares after the company has gone public. However, this pair of buys--each totaling over $11 million--perhaps speaks to the future prospects for both Juniper and its powerful industry segment.