With investors fleeing the technology sector, stocks overall look likely to continue their weakness, right? Perhaps. But judging by the actions of one group of knowledgeable investors -- corporate insiders -- the market's long-predicted rotation may finally be at hand.
The action seems to be centered on some long-neglected shares whose businesses remain robust, even if their share prices haven't. In fact, insiders are not only buying at some major league names, but are doing so where insiders have historically been much more likely to sell than to buy. For example, the recent purchases at defense contractor
are the first of any consequence at the company since back in 1991. Incidentally, the 1991 accumulation occurred early in an impressive recovery, just after the stock bottomed at less than 5 (split-adjusted) in 1990.
Over the past few months, four General Dynamics insiders purchased a combined 20,000 shares at prices ranging from 41 1/2 to 51 1/4. Executive Vice President Gordon England, last a buyer in the 1991 round, led the way, picking up 10,000 shares. Though more modest, CEO Nicholas Chabraja's 2,000-share purchase marked a reversal from his sales back in February 1999. Indeed, as a rule, General Dynamics insiders have been moderate
over the years -- a fact which makes the recent buys all the more intriguing.
Insiders are also picking up shares of fellow contractor
as well. To be sure, Litton has had its share of problems, culminating in a Feb. 7 profit warning. Still, trading at just over half its July 1999 highs of 73, Litton appears cheap by most valuation measures. In February, two insiders acquired a combined 395,020 shares in the 30 to 36 range. The real story here is director Charles Thornton, who purchased 240,000 shares directly and an additional 150,000 shares through a partnership for which he is a general partner. For the record, that's an investment of more than $12 million.
For those of a more hospitable nature, insiders are also buying
. Here, three insiders picked up a combined 36,000 shares at prices quite near the stock's six-year lows. On the one hand, the outlook could be brighter for lodging stocks in general. On the other, Hilton insiders may be signaling that at 7 and change, and with a price-to-earnings ratio well below that of most of its peers, Hilton may have drifted a bit too low.
Finally, for those intent on finding a bargain among the financials, insiders at
Hartford Financial Services Group
are sending some pretty strong clues. Since the last quarter of 1999, the customary selling we have come to expect from Hartford insiders has completely dried up. What's more, since late December, insiders have been acquiring shares. In all, four insiders have picked up 85,384 shares at 33 15/16 to 42 7/16 per share.
Most striking in this case, director
purchase of 63,384 shares comes just seven months after he sold 100,000 shares in June of last year. As insiders go, that's a pretty sudden about-face. And as mentioned, Hartford insiders are historically near-chronic sellers. If there is a drawback here, it is that the stock has already moved a good bit off its (apparent) early March bottom of 30. If the last few years have taught us anything, it's that you don't have to catch the bottom to make money in this market.
Still not sold on value? Well, consider this: Former
recently purchased shares of mail processing and imaging systems developer
Bell & Howell
is getting in on the action. In recent months, the reigning software guru upped his stakes in such improbable names as diversified energy services provider
and venerable, albeit unglamorous, metal-bender
Newport News Shipbuilding
And there you have it, evidence indeed that there may be life beyond technology.
Bob Gabele has been tracking and analyzing insider trading since 1978, most recently for First Call/Thomson Financial. This column is not meant as investment advice; it is instead meant to provide insight into the methods of insider trading. At time of publication, Gabele held no position in any of the companies discussed in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Gabele appreciates your feedback at