Yielding to Insiders, Part II

In this two-part series, Moreland presents stocks with high indicated yields that insiders are positive on and those that insiders are selling despite the apparently attractive income. He discussed high-yielding stocks in which insiders seemed to be taking bullish positions. In the second part, he takes a look at high-yielding stocks insiders seem to be bearish about.

I don't usually run a screen for high-yielding shares that insiders are selling. If I'm looking for a potential short idea, I generally combine insider activity with poor price action, decreasing cash flows, falling margins, a deteriorating balance sheet, an increase in short interest or a combination of such factors.

But after looking closely at high-yielding firms insiders are buying, I was curious to see what would be produced by flipping the insider criteria from positive to negative.

The table below includes stocks with at least $200,000 worth of aggregate open-market insider selling activity since the beginning of February and yields of 3.5% or more. I analyzed the insider profiles and made sure firms on the attached list met my threshold of significant insider selling activity. Stocks below the $100 million market cap were also removed.

Insider Selling in High-Yielding Stocks Company reports

At the very least, the stocks on the table below should be avoided by any investors looking solely for yield in favor of the names presented in yesterday's bullish yield screen. Given the overlap in a couple industries on my bullish and bearish screens, a bit more analysis could also identify logical paired long/short trades.

The trite but true observation about insider selling is that it's tougher to garner good investment intelligence from selling than it is from insider buying. There are too many reasons for executives to sell, including diversifying assets or giving into the urge to consume. But the only decent reason to tie up their capital by buying shares is that they think they'll make it grow.

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At the time of publication, Moreland had no positions in the stocks mentioned, 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.