What to Do When Insiders Exit

Sure, sales by the founders of Google are easily dismissed because of the honest need for those gentlemen to diversify. But there are plenty of mere mortals at the firm whose sales are leaving them with little or no direct holdings left to vacillate with the vagaries of the market.

Vocus Focus

Recent insider sales at Vocus are just as telling. The firm's shares started showing weakness in December after hitting all-time highs of just over $38. But that hasn't stopped five executives and directors from selling nearly $3.2 million worth of VOCS so far this year at an average price of just $25.41.

For several of the sellers, their latest divestitures represented a noticeable portion of their direct holdings. Director and co-founder (and past chief technology officer) Robert Lentz seems particularly interested in "diversifying" his holdings. He has sold more than half his direct holdings in the past year. Granted, Lentz has decided to retire. But his hurry to sell -- and acceptance of such a low price relative to past highs -- is a red flag.

It is also at odds with the company's recent financial performance. Vocus, which sells Web-based software for public-relations management, increased revenues by 44% in 2007, to $58.1 million. Non-GAAP EPS nearly doubled, to 50 cents. Vocus also raised its guidance for 2008 in its latest conference call. Management now expects sales to reach as much as $75 million, and non-GAAP EPS to increase to as much as 65 cents.

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