Vitesse (VTSS - commentary - Cramer's Take) makes semiconductor products for the storage and communications markets. The company has been retrenching for years after the glory days of the 1990s, with mixed fundamental results. It remains unprofitable, and revenue growth has been spotty.
As far as persistence is concerned, however, Vitesse's insiders rank right up there. After smartly cashing out during the bubble years when their stock traded above $70, longtime insiders James Cole and Eugene Hovanec have posted nothing but buys as Vitesse has swung between being a penny stock in late 2002 and rising to near-term highs of more than $9 in early 2004. The pair have averaged up, averaged down and passed on the opportunity to sell positions that have appreciated nearly 1,000%.
The stock is way down from $9 now, however, and since last May, Mssrs. Hovanec and Cole and CEO Louis Tomasetta have picked up another 105,000 shares at an average price of $1.97. They are clearly surprised that Vitesse is even cheaper now -- vice president Christopher Gardner is also surprised. Gardner exercised options in September at a strike price of $1.79, and did not sell the shares. Vitesse was trading for $2.20 at the time, and Gardner made the bullish decision to hold on to the shares. In hindsight, that was not a good move, but it does add to the positive picture that insiders have painted for Vitesse.
Of course, the fact that insiders have been wrong makes the timing of following them problematic. Vitesse has been both good and bad to us in the past. I followed insiders into the stock too early back in 2002, and chalked up three losing trades. The fourth time was a charm, though, and the 290% gain from the final trade more than made up for the losses. I wasn't clever enough to ride the stock all the way up to $9, but thought the stock was way ahead of itself even at $6.
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At the time of publication, Moreland was long Vitesse, although holdings can change at any time.
Jonathan Moreland is director of research and publisher of the weekly publication InsiderInsights, founder of the Web site InsiderInsights.com and the director of research at Insider Asset Management LLC. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, Moreland appreciates your feedback; click here to send him an email.
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