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Horton CEO Sells Stock: Bear or Tax Bill?

Stocks in this article: DHI TOL

FORT WORTH, Texas ( TheStreet) -- The chairman and CEO of homebuilder D.R. Horton sold 117,00 shares priced at $10.23 in a recent insider transaction.

It might seem that the last thing a homebuilder like D.R. Horton needs to do at a time when the market is sour on the sector -- Toll Brothers earnings today were another bleak report on industry health -- is to have its top management sell its own shares.

Does it send the message to investors that not even management thinks the shares will go up any time soon? Right or wrong, it seemed to send that message to the market yesterday.

"We've got Toll's disappointing numbers today, and D.R. Horton dropped yesterday 4% when the CEO exercised his option to sell shares. You always wonder when you see that," said Michael Widner, analyst at Stifel Nicolaus.

Still, while insider stock sales will always raise an eyebrow, in the final analysis the skepticism may not be merited when it comes to executive compensation being paid in stock. It's always going to be notable when a CEO exercises his right to unload the shares of his own company at a profit, especially when that company and its sector are reporting big losses. In the end, however, it is often related to a government tax bill, and not any CEO vote of no confidence in his own company.

D.R. Horton was near a 52-week high at several points during August and September, but since then has trended down. D.R. Horton's recent disappointing earnings brought the stock as close as it has come in a long time to some analyst price lower price targets around $9. Yesterday, when the sale by chairman and CEO Donald Tomnitz was reported to the Securities and Exchange Commission, the stock dipped to its lowest level in three months, or a decline of 4%, out of line with yesterday's movement in homebuilder stocks.

In the early afternoon Thursday, D.R. Horton was down marginally, trading at $10.

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