Customer Service 1 (888) 261-2693
Advanced Search

Two Stocks with Insider Approval

By Stansberry Research Interview Series
Monday, November 5, 2007

We're getting mixed signals.
 
Corporate insiders continue to bet heavily on a market rally in the fourth quarter. Last week, the sell-to-buy ratio was firmly in bullish territory at 13 to 1. (In these times of massive options grants, anything below 20 for the ratio is bullish.) By headcount, insider sellers only outnumber buyers by 2 to 1 – again, bullish.
 
Besides this, insiders have been buying finance stocks for the last several months. The finance sector typically leads any major market moves. So seeing insiders betting on a finance rally is a strong sign of optimism.
 
Yet, finance stocks are not rallying.
 
The big banks have all posted losses or earnings misses in the last month. The two largest – Citigroup and Bank of America – both saw third-quarter profits fall by more than $1 billion. On Tuesday, Citigroup led the plunge with a 7% drop on credit concerns.
 
More worrisome is the fact that Merrill Lynch's share price has broken down. My colleague Jeff Clark often refers to Merrill as a "canary in the coal mine" for finance stocks. Merrill posted a $2.2 billion loss for the third quarter: the biggest in its history.
 
Merrill CEO Stan O'Neal stepped down last week. And Merrill's stock is dropping like a stone. In fact, the only time the stock rallied was when rumors started that O'Neal might get canned.
 
The chart below, of the Financial iShares, sums up the finance misery:
 
 
Given this horrible price action, I'm on the sidelines right now. Historical market indicators (insiders and financials) are not lining up. Until they do, establishing new positions is too much of a crapshoot for my liking.
 
However, two stocks have caught my attention and could warrant capital should the market launch a sustained rally:
 
Company
Symbol
Insider Buying
Last Three Months
ValueVision Media
VVTV
$1.9 million
First Horizon National
FHN
$3.9 million
 
VVTV runs the Home Shopping Network. It's trading at seven times earnings and has no long-term debt. The company's insiders are clearly betting on consumers getting back to buying junk from TV soon. FHN is the holding company for the financial-services firm First Tennessee Bank. Like all banks, it's been hammered this year, and it now yields 7%.
 
At this point, I wouldn't buy either company. But if the market launches a sustained rally, these "insider approved" stocks could be worth further research.
 
Good trading,
 
Graham




Recent Articles
Market Notes
Blood in the streets... Citigroup, JPMorgan, Wachovia, Washington Mutual, Freddie Mac, Merrill Lynch, SunTrust, CB Richard Ellis, and Home Depot lead a big new lows list.
 
The magic $800... Goldcorp, Kinross Gold, Arizona Star Resources, and Miramar hit new highs.
 
Canadian oil miner Oil Sands Quest at new 52-week high.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%