An Insider Who Would Know Adds to Position in Steris

Steris(STE) CEO Les Vinney seems to have the Midas touch. Since taking over the company, which makes systems to prevent infection and contamination, he's produced results that have beaten estimates in every quarter, and in the last three quarters, per-share profits have bested year-earlier comparisons by at least 30%.

Therefore it was nice to see him buying another 4,000 shares of the company after they fell from $23 to $18 in early December. There's nothing to account for the selloff, and the CEO's buy gives credence to the notion that extrinsic market gyrations were the culprit.

Steris is the market leader in its sector, and its systems are sold into health care, scientific, research and food industries throughout the world. There is also the chance that recent Anthrax concerns could help the company build up business in new bio terrorism areas as well, but I view the prospects of Steris' established business as good enough to justify taking a position.

Steris had been beset by major operational problems, but Vinney has implemented an impressive turnaround since taking over, despite the economic environment. He has radically cut costs, and sticks by his guidance that earnings can grow 35% to 40% a year over the next few years (and 40% to 45% in the current fiscal year that ends this March). In contrast, the stock sells for 21 times projected consensus estimates for the year that ends in March 2003.

Although some insiders took profits after it surged into the $20s, Vinney has never sold a share, while being an excellent indicator of value whenever he has purchased.

Messy Market

Let's face it: It was easy to make money in the last quarter. But insiders just can't stop warning us that this market has gotten ahead of itself.

During the heavy Form 4 filing week (ended Jan. 11) over, there were 487 companies with insiders filing Form 4s indicating purchases, and 872 with insiders selling. This is a bearish ratio of 79% more companies with sellers, and is consistent with the warning we received starting in November. (See our Dec. 17 column for more on my insider market Indicators.)

In the clearest indication yet that the short-term pullback insiders have been expecting may have begun, the recommended list of stocks in my weekly InsiderInsights newsletter is experiencing a wave of stop-outs. I've been ratcheting up the stop losses on my winning positions to protect the hard-won gains, and to make sure that any loser doesn't hurt too much. And with the market weakening recently, I was stopped out of five positions during the week ended Jan. 11, and another five last week (all of these, except for bakery firm Flowers Foods(FLO) and biotechs Genzyme Transgenics (GZTC), CardioGenesis(CGCP) and Antigenics(AGEN) are companies I've discussed in my RealMoney columns). Those 10 stocks, with their pertinent stats, are listed below.

I still have 37 open positions on my full recommended list, which collectively have an average return of 21.6% and an average holding time of 9.1 weeks. None of the eight losers of the 37 are down more than 8.9%.

But I fear my recommended list may decrease as I get stopped out of more positions than I add over the coming weeks. The increased volatility in the market is noticeable, and this is hardly the mentality we needed coming into earnings season. Investors may just end up selling based on whatever a company announces -- i.e., dumping an underachiever that misses numbers, or taking profits in the companies that meet or beat expectations.

Although January started well, it looks like it could have a messy ending.

Stopped Out The recent pull-back has stopped me out of a large number of positions.
Company	Ticker	Rec.Date	Rec.Price	SaleDate	SalePrice	% Gain(Loss)	Weeks Held
Flowers Foods	FLOT	11/5/01	28.10	1/7/02	25.50	(9.3)%	9.0
Hydril Company	HYDL	10/22/01	16.47	1/8/02	16.75	1.7	11.1
Genzyme Transgenics	GZTC	11/5/01	3.99	1/8/02	5.00	25.3	9.1
Antigenics	AGEN	9/24/01	12.00	1/11/02	15.00	25.0	15.6
Win-Dixie	WIN	11/19/01	13.13	1/11/02	13.15	0.2	7.6
American Tower	AMT	12/17/01	7.00	1/14/02	8.00	14.3	4.0
Gulf Island Fabrication	GIFI	10/22/01	10.25	1/14/02	12.00	17.1	12.0
Metris Companies	MXT	11/12/01	16.65	1/14/02	24.00	44.1	9.0
CardioGenesis	CGCP	1/14/02	1.04	1/16/02	0.90	(13.5)	0.3
Netmanage	NETM	12/24/01	0.90	1/18/02	1.00	11.1	3.6