U.S. executives and directors sold $51. 3 billion of shares in their companies last year, the largest amount since 2000 when shares of Internet-related companies plunged. Microsoft Chairman Bill Gates...
U.S. executives and directors sold $51.3 billion of shares in their companies last year, the largest amount since 2000 when shares of Internet-related companies plunged. Microsoft Chairman Bill Gates topped the list.
Sales by so-called insiders rose 20 percent through Dec. 24, while purchases rose 13 percent to $2.11 billion, according to the Washington Service, which tracks Securities and Exchange Commission filings. Gates, along with executives of Dell and Oracle, sold more than $1 billion in stock.
The pace of selling picked up as stocks surged in the fourth quarter, with November’s sales the highest since August 2000, according to Thomson Financial. U.S. executives may be concerned about the prospect for slowing earnings growth in 2005 as the Federal Reserve Board raises interest rates.
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“CEOs are not enthusiastic about company shares,” said Michael Painchaud, director of research for Seattle-based Market Profile Theorems, which provides research on insider sales to large investors. ” The attitude of insiders can give clues as to the shape of the year ahead. The clues don’t look good for equities in 2005.”
The value of sales was 24 times the value of purchases, according to the Washington Service. In November, insiders sold $46 in stock for every $1 purchase, reflecting “very bearish” sentiment, said Lon Gerber, director of insider research for Thomson Financial.
Wall Street analysts have expressed similar skepticism. Fourteen strategists surveyed by Bloomberg News said they expect the Standard & Poor’s 500 index to rise on average 2.5 percent next year. Earnings for companies in the S&P 500 are forecast to rise 10.5 percent in 2005, down from 19.2 percent this year, according to Thomson Financial.
Sales of shares by executives reached the highest level since 2000’s record $80.1 billion, when Internet and computer-related stocks pushed the Nasdaq composite index to a peak of 5,132.52 in March of that year. From that point through the end of 2003, the index lost almost three quarters of its value.
Gates, the world’s richest man, sold 81.8 million Microsoft shares for $2.21 billion last year. Gates periodically sells shares to diversify his investments, spokeswoman Rachel Wayne said. Shares of Microsoft fell 2.4 percent last year.
Some investors say purchases by executives and directors may be a better indicator of a stock’s prospects than insider sales. Insiders tend to sell for many reasons — to buy a house or because they suspect the stock is near its peak.
Investors such as Charles Stutenroth, who helps manage $24 billion for Fort Washington Investment Advisers, say they like to see insider purchases as a sign of confidence.
“Stock ownership is the most clear indication of the CEO’s investment judgment on his firm,” said Stutenroth, who is based in Cincinnati.
Insider buying was led by financier Carl Icahn, chairman of telephone company XO Communications, who spent $190 million to purchase preferred shares of the company that can be converted into common stock at $4.62 per share. Icahn owns a majority of the company.