Insider Buying Trend Spurs Some Tech Sector Optimism
As technology and telecom stocks have swooned for more than a year, analysts who track insider stock transactions have been searching for signs from industry executives that the bottom might be in sight.
Federal filings last month may provide such a signal, one analyst said Thursday.
“The picture has improved in the tech sector as insiders have started to selectively accumulate shares,” said Lon Gerber, director of research at Thomson Financial/Lancer Analytics in Scottsdale, Ariz.
Still, buying and selling in June by executives and other large shareholders classified as insiders has been far from definitive, Gerber cautioned. “We’d like to see this continue, and we’d like to see even more companies get involved in the buying,” he said.
The value of stock purchases by insiders at tech and telecom companies surged 66% to $42.4 million in June--their highest level this year--from $25.5 million in May. Sales, meanwhile, plunged 73% to $506.8 million from $1.9 billion in May and occurred at fewer firms (179 versus 376).
Analysts watch insider sentiment in an attempt to gauge where specific stocks, and the overall market, could be headed, on the theory that insiders are best positioned to buy low and sell high.
Among telecom firms trading near 52-week lows in June, insiders did some bargain hunting at Level 3 Communications Inc. (ticker symbol: LVLT), Qwest Communications International Inc. (Q) and Aether Systems Inc. (AETH), he said. In the software area, insiders bought shares of S1 Corp. (SONE).
Level 3 had its largest consensus buying to date, with three directors purchasing shares. Qwest and Aether Systems had their first insider purchases since October 1999, he said, and S1 had its first buying since November 1998.
Selling normally far outweighs buying in the tech area, where compensation often includes stock options that can make open-market purchases less attractive.
Despite the weak stock market, overall insider sentiment appears to be stuck in neutral, Gerber said.
Still, there have been bullish spots in addition to tech. Insiders have stepped up at real estate investment trusts including Post Properties Inc. (PPS), United Dominion Realty Trust Inc. (UDR) and Apartment Investment & Management Co. (AIV), Gerber said.
Thomson Financial/Lancer Analytics also reported buying at Tyson Foods Inc. (TSN) and ConAgra Foods Inc. (CAG).
