NEW YORK (
CEO David Lesar reported his biggest insider sale of the year on Thursday, unloading just under 77,000 shares of Halliburton at an average price of $30.03.
Just a day after
took aim at Halliburton in its interim oil spill report, one might jump to the conclusion that the Halliburton CEO was in panic mode following the comment from outgoing BP CEO Tony Hayward that Halliburton was responsible for a bad cement job. That would be as ill-advised a conclusion as to trust each and every word from BP about the causes of the oil spill. In fact, the near 77,000 shares sold by Lesar and reported by Halliburton on Thursday were actually sold in a transaction on Tuesday, according to the Securities and Exchange Commission filing document.
This doesn't mean that a major stock sale from the CEO of a major company doesn't deserve a look from investors. However, this particular sale has nothing to do with the BP oil spill, and in the final analysis, is probably an insider transaction that can be chalked up to regular financial planning by a CEO.
The last big sale by the Halliburton CEO was in November 2009, when Lesar sold more than 100,000 shares of Halliburton at an average price of $29.35.
The Halliburton CEO netted roughly $2.3 million in this week's selling activity.
The Halliburton CEO sale was done under the auspices of an SEC-approved umbrella for retirement-related planning. Insider sales critics say that the SEC provision is controversial, and investors shouldn't automatically assume that just because insider sales have the SEC blessing, they were really conducted for retirement planning purposes. Yet in the case of Halliburton, the latest sale, matching the big sale at the end of 2009 and at a similar price, would be consistent with this type of insider action.
Skeptical investors often look to major insider sales by CEOs as a call on the direction of a stock price. In the case of the Halliburton CEO, though, there are several factors that contradict this kind of skepticism.
For one, the Halliburton CEO has kept his overall share count consistent over the longer-term. Even selling close to 77,000 shares this week, Lesar still holds roughly 1.1 million shares of Halliburton. Going back to the end of 2008, Lesar's insider holding of Halliburton stock has risen above 1.2 million shares, but never below 1.1 million. This is the type of consistent share count that insider sales hawks look for to show that a CEO sale is not indicating a lack of faith in a stock's value.
Halliburton's 52-week high is over $35. Halliburton shares are currently trading near the $30 mark at which Lesar sold. Insider stock sale experts say it's also important to consider the six-month trailing performance of a stock at the time of a big insider sale. In the case of Halliburton, shares are down a marginal 0.5% over the past six months.
Analysts who cover Halliburton and the oil services sector also note that for executives in an industry where the price of their stock is tied to the movement in the price of oil, insider sells are not at eyebrow-raising as when, for example, a small-cap growth technology CEO sells a big bulk of his insider shares. Over a reasonable investment time horizon, so much of the returns in the Oil Services Sector Index are based on the price of oil that compensation has to be returned to executives gradually through stock sales.
Just as BP claims no single factor caused the oil spill, it seems in the case of the sizable selling by the Halliburton CEO, no single, nefarious cause was at work.
Halliburton shares may be range-bound like all oil stocks -- as long as macroeconomic uncertainty continues and the global exploration and production business slumps toward recovery -- but selling Halliburton at $30 isn't likely an indication that the company's CEO has as much faith in its prospects as BP does in Halliburton's ability to properly cement a deepwater well.
--Written by Eric Rosenbaum in New York.
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