It seems investors weren’t the only ones taking profits this earnings season: corporate insiders, especially in technology companies like Google and Cisco , were selling into the good results as well.
The S&P 500 is off four percent from its 2010 high on Jan. 19 that came right as the fourth quarter earnings reporting perion was ramping up. Earnings season is winding down this week.
Investors sold despite the fact that the quarter’s reports showed that profits more than tripled from the year before and that more than 70 percent of companies exceeded analysts’ expectations, according to Thomson Reuters. But after results like that, why the insider selling.
“I would characterize this as further evidence of expectations for range bound markets and the likelihood of higher capital gains taxes ahead,” said Gary Kaminsky, former manager of $13 billion at Neuberger Berman and a ‘Fast Money’ regular.
Google made the list of stocks most actively sold by insiders over the last 90 days, according to Vickers Weekly Insider report, including sales by founders Sergey Brin and Larry Page in February. Google was quick to point out that the sales were part of an established trading program over time to allow the founders to get out of a portion of their holdings, but a planned sale is still a sale.
Cisco Chairman John Chambers sold 2.2 million shares of the company this month due to the exercise of options. But a vice president and director also sold shares, putting Cisco on the radar of insider watchers.
Maybe it’s no coincidence then that technology is the worst performering sector this year, after being the best last year. The Technology SPDR is down 5 percent in 2010. Other tech company’s on the Vickers’ “Most Actively Sold By Insiders List” include Salesforce.com, Imax and Netflix.
Alan Newman, writer off the ‘Crosscurrents’ newsletter and an early skeptic of the market during the tech and housing bubbles, likes to watch the insider activity of the biggest members of the Semiconductor HOLDRs (SMH) ETF, which contains companies such as Intel and Texas Instruments. By his count, among the top ten constituents of this ETF, he sees 2 buyers and 78 sellers.
“Given today’s reliance on chips in so many products that use electronics, this may be one of the best snapshots we have of the potential for economic expansion down the road,” wrote Newman, in his newsletter to clients yesterday. “If insiders see the road ahead paved with growth, they will tend to hold onto their shares. If not, they will be quite happy to part with them."
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