This column was originally published on RealMoney on Sept. 7 at 2:44 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.
Insider buying and selling never tell the full story. Most of the time, I avoid doing anything off either, unless the buying is concentrated and heavy or the selling is poignant after a big move.
Today, though, I am itching to take action in one stock because of insider buying,
. And insider selling made me kick out
, a company that I had owned for my charitable trust,
Let me explain.
Lions Gate impresses me as one of those companies that wants to make movies to make money, not for ego or to satisfy some innate intellectual quest. Lions Gate recognizes that movies are a form of commerce; you make them for X amount of dollars and want them to generate four or five X.
That's smart. It's also unlike what I see at the other movie houses, where I believe they often have different motivations. So when I saw clustered buying, it caught my attention.
"But, ahh," you say, "
has clustered buying, why not like that?" Because I don't care for the business model, and because life is way too short to be caught up in that battleground.
For Pentair, I wanted to wait to see if it could get some big pump orders out of New Orleans. The last quarter was just OK and the guidance was simply not OK, but Pentair is in the water pump business, so, I figured, why not let it be taken up by the Katrina traders?
The CEO, Randall Hogan, though, couldn't wait. It was revealed Tuesday that
filed to sell 30,000 shares last week. You have to figure that if there were some huge orders coming, this guy would know and he wouldn't file to sell. So I stopped hoping and I booted the darned thing.
Now, I know that people sell for a million reasons: divorce, estate planning, prudence. But this stock's well off of its high, and I can't believe that the guy needs the money that badly. Heck, maybe he's donating the proceeds. I don't know, and I don't care. I lost so much faith in the company after that last quarter that the only thing that would have made me keep the stock longer term was a
of 30,000 shares, and I sure didn't see that.
Insider buying and selling are not indicators of anything in the short term. I don't expect Lions Gate to blow away next quarter's box office. I don't expect Pentair to have a big shortfall. But when graphed over the fundamentals for the longer term, I believe insider activity is a valid push if you are teetering in one direction or another.
So, sayonara, Pentair, and, if I could own such small stocks, hello, Lions Gate!
P.S. from TheStreet.com Editor-in-Chief, Dave Morrow:
It's always been my opinion that it pays to have more -- not fewer -- expert market views and analyses when you're making investing or trading decisions. That's why I recommend you take advantage of our
premium Web site, where you'll get in-depth commentary
money-making strategies from over 50 Wall Street pros, including Jim Cramer. Take my advice --
James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for ActionAlertsPLUS by
clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by
clicking here. Listen to Cramer's RealMoney Radio show on your computer; just click
here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click
here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click
here to get his second book, "You Got Screwed!" and click
here to order Cramer's autobiography, "Confessions of a Street Addict." Cramer appreciates your feedback and invites you to send him an email by