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Insiders Are Buying What the Headlines Hate

By Stansberry Research Interview Series
Monday, April 16, 2007

We're getting mixed messages.
 
From a technical standpoint, the S&P 500 looks set for further drops.
 
We've now seen the S&P 500 rally above its 50-day moving average (the blue line) twice in the last month. The first time, we were turned away at 1,440. And we've yet to break above that level with this current rally.
 
Should the S&P 500 stage a sustained rally above 1,440, we're in for a nice bull run. However, not once in the last three years has the S&P 500 dropped as much as its recent correction without falling below its 200-DMA (the red line) soon after.
 
 
 
The truth of the matter is that the S&P 500 has been due for a correction below its 200-DMA for months now. February's dip didn't even come close. We're not going to play fortuneteller... but at some point in 2007, I expect we'll see the S&P 500 fall below its secondary support line for a while.
 
And yet, in spite of the likelihood of another market correction, insider sentiment continues to improve. For the month of March, insiders bought $758 million worth of stock and sold $9.9 billion worth of stock, bringing the sale-to-buy ratio to 13 to 1: below the historic average of 20 to 1.
 
Insiders continue to load up on energy and finance stocks.
 
As of March 19, oil and gas exploration/production companies led the pack for insider buying. Insiders are also loving regional banks, mortgage REITs, investment banking, and brokerages. Collectively, these sectors accounted for 56% of March's insider buying. It's an interesting trend, considering all the terrible headlines written about the mortgage market.
 
Most regional banks are too small and illiquid for me to make official recommendations in my Inside Strategist advisory. But the following banks have experienced significant insider purchases in the last couple of months:
 
Company
Symbol
Insiders Bought
Centerstate Banks of Florida
CSFL
$2.2 million
Capital Bank Corp
CBKN
$2.1 million
TrustCo Bank Corp NY
TRST
$1.9 million
Capital Corp of the West
CCOW
$1.9 million
Community West Bancshares
CWBC
$1.8 million
 
As for REITS, the following are popular among insider bulls:
 
Company
Symbol
Insiders Bought
Consolidated Tomoka Land
CTO
$18.9 million
Saul Centers
BFS
$18.9 million
Resource Capital Corp
RSO
$13 million
JER Investors Trust
JRT
$12 million

Consolidated Tomoka
is a favorite of my colleague Dan Ferris – his readers have tripled their money since September 2003. Recently, 10% beneficial owner Wintergreen Advisors has been buying CTO stock hand over fist. The company is Wintergreen's second largest holding, comprising 6% of its portfolio.
 
Saul Centers is a shopping center REIT with properties in Maryland. Over the last two years, CEO Francis B. Saul has bought $30 million of his company's stock. During that time, shares rose from $33 to $55. This is an excellent company yielding 3%.
 
If you're willing to go against the crowd that believes a further mortgage meltdown is in the cards, consider this list of insider buying as a good starting point.
 
Good trading,
 
Graham




Recent Articles
Market Notes
A broad rally continues: iShares Global Healthcare, Energy, and Global Telecom all hit 52-week highs.
 
Strong showing for Big Pharma: Schering-Plough, Wyeth, and Merck at new highs.
 
Strong showing for Merck, strong showing for benchmark Pharmaceutical HOLDRs ETF: sitting at new 52-week high.
 
Oil-service giant Schlumberger joins the oil-service rally.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
Change
52-Wk
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%