NEW YORK (TheStreet) -- It makes intuitive sense.
When insiders sell stock, there must be something wrong. When they buy, they're sending bullish signals because they know something we don't.
I subscribe to the
perspective on intuition: The little man inside of you
know all; in fact, there's a better-than-zero chance that your
Everybody likes to dog IPOs. Take
Every hysterical non-visionary and his buy-and-hold grandmother warned the stock would tank on lockup expiration. Didn't really happen. In fact, FB went on one hell of a run over the last two weeks -- up roughly 25%.
Lockup-associated or not, you have to understand how insider selling on these stocks rolls.
If you look up insider transactions for just about every big name company (and many small), you'll find selling. Tons of it. And it tends to happen without regard for the direction the stock is headed or the prospects of the company that floats the paper.
Most insiders sell as part of their compensation packages, particularly at relatively young and/or tech companies.
Look at Facebook COO Sheryl Sandberg -- like any other insider, the SEC makes her moves
. She's executing regular automatic sales that she probably doesn't even pay much attention to. It's not like Sandberg logs in to
hemming and hawing over the price she gets for her 169,000 share lot of Facebook.
There's nothing nefarious about her selling. Forget that she still owns like two million shares. That doesn't even matter. She's selling because that's part of the game. Good company, bad company, good IPO, bad IPO -- insiders sell to get rich or, in Sandberg's case, richer. Don't read into it.
By contrast, man a-freaking-live, I hope you didn't take cues from recent insider buying at
Over the last six months, a couple of insiders on HP's board gobbled up shares at prices ranging from approximately $21 to $23.
, it appears that HP's executive chairman of the board, Raymond Lane picked up nearly 250,000 shares of HPQ in that ballpark over multiple buys.
He's getting crushed.
Another director, Ralph Whitworth, is in even worse shape, though he doesn't feel as much personal pain.
Whitworth runs a "value" fund out of San Diego known as
Relational Investors LLC
. In other words, he manages money. And he's bullish HPQ. So bullish that he loaded up this past spring adding millions of shares to his fund's allocation.
Consider one of his buys. On May 31, Relational Investors picked up 3,092,158 additional shares of HPQ at an average price of $22.54. That's an investment of $69,697,241.
Using HPQ's Friday close of $12.44, that lot is now worth just $38,466,445, a decline of about 45%. Whitworth's firm is long just shy of 35 million shares of HPQ, according to the latest documents filed with the SEC.
If this was an "activist" move by Whitworth, it's not working. He's overweight HPQ, he doesn't own enough to get very hostile, he's getting killed on the position and if he wields any influence on the company's board, it's having no positive impact.
Don't follow the noise that surrounds insider buys and sells, particularly when you hear people yelp about "value" from the bullish side. On the bearish side, it's popular to blab uninformed that insiders sell because they don't believe in their company. Often, that sentiment could not be farther from the truth.
-- Written by Rocco Pendola in Santa Monica, Calif.
Rocco Pendola is
Director of Social Media. Pendola's daily contributions to
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