They're outta here. The nation's corporate insiders have been unloading stock at a feverish pace in 1991. Which doesn't indicate much optimism about the stock market.
For every purchase by an insider, three sales have taken place, according to Vickers Weekly Insider Report. That relationship is the reverse of the situation in late 1990 when insiders were snapping up stocks at bargain-basement prices amid war-time trauma.
The selling pace has accelerated in the past two months. Technology and health care, two groups which ran up impressive gains, have been big sell targets by officers, directors and significant shareholders. Insiders have been selling their shares of U.S. Surgical, Humana Inc., Microsoft Corp., The Limited, National Medical Enterprises, Intel Corp. and Time Warner Inc. Others being dumped include Digital Equipment, General Motors, Hewlett-Packard and Acuson Corp.
"Nobody sells a stock that he thinks will go up in price any time soon, so it appears corporate insiders are wary about whether economic recovery will really take place in the second half of the year," observed Charles LaLoggia, editor of the Special Situation Report, which tracks the filings of those important investors. "Last fall, insiders were wisely buying at a low point in the market, and it's noteworthy that they're now selling at a time when the consensus is optimistic."
Insider trading is tricky to interpret, since key executives sometimes do sell for purely personal reasons. No seller ever admits that his shares were overpriced, that he anticipates negative news or that he expects the market to head south. Yet, particularly when sales occur in clusters of important sellers, such selling activity is worth tracking.
"The investor must look at the financial strength of a company, of course, and buying or selling strictly based on insider transactions would be too limiting," said David Coleman, editor of Vickers Weekly Insider Report, which follows all open market transactions of 500 or more for those shares costing at least $1. "But following sell and buy action can help you decide whether a stock is worth considering."
While purchases have been far more scattered than sales, insiders have been buying C.I.S. Technologies, Medical Marketing Group, Blair Corp., Whitehall Corp., Motorola Inc. and Ashton-Tate, Coleman noted. Other purchases have included Bethlehem Steel, Phillips Petroleum and Viacom Inc.
LaLoggia offers up some stocks worth buying based on positive insider activity:
* WMS Industries, largest maker of pinball and video games and owner of hotel casinos. Sumner Redstone, chairman of National Amusements and Viacom, has accumulated 30 percent of WMS, making the firm a potential takeover candidate. As a kicker, the company has developed a video lottery terminal which might enhance profits.
* Goody Products, maker of hair-care products that include Ace combs. Newell Co. has been buying Goody stock to the tune of more than 10 percent of outstanding shares. Newell has a history of acquisitions.
Vickers Weekly Insider Report, 226 New York Ave., Huntington, N.Y. 11743, has an annual subscription price of $152. The Special Situation Report, P.O. Box 167, Rochester, N.Y. 14601, costs $230 annually, and offers a $50 trial subscription.