Poly Want a Turnaround

Like so many of the stocks insiders are buying lately, shares of PolyOne (POL - commentary - Cramer's Take) are well off their 52-week high. That's not surprising given the slowdown in some of the industries PolyOne serves, but it's a negative that insiders think is already priced into the stock.

PolyOne is a global provider of specialized polymer materials, services and solutions, with operations in North America, Europe, Asia and Australia. Its raw materials and value-added products are used widely in various industries, including homebuilding, autos, packaging and numerous durable goods.

The changing supply/demand metrics of major business segments is certainly a reality that management at PolyOne has recognized. Late in 2006, the firm began a transformation away from its commodity-based segments, to focus more on higher value-added solutions. PolyOne spiked north of $9 back in July when the company announced it had sold its 24% stake in OxyVinyls for $261 million. This was a major step in PolyOne's transformation, allowing the firm to pay down high-interest debt while also removing a major source of earnings volatility.

Alas, a transformation takes time, and the OxyVinyls divestiture hardly relieves PolyOne from its exposure to slowing markets in its remaining vinyl segments. The 12% decline in sales from the firm's vinyl segment offset gains elsewhere and resulted in flat year-over-year sales in the third quarter.

PolyOne understandably fell on the quarter as a result, but insiders have bought in noticeably during the recent weakness. Since the last half of November, six executives purchased nearly $570,000 worth of PolyOne at an average cost of $6.46 a share.

Of particular note, Vice President Michael Kahler doubled his holdings with his recent buys. And after smartly selling shares back in May of 2006 for over $9 a piece, Vice President Robert Rosenau has recently chosen to increase his stake by 40% at current prices.

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At the time of publication, Moreland was long PolyOne, 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.