Mark Cuban charged with insider trading originally appeared on BloggingStocks on Mon, 17 Nov 2008 11:50:00 EST. Please see our terms for use of feeds.

Continue reading What to make of related-party transactions

What to make of related-party transactions originally appeared on BloggingStocks on Tue, 02 Sep 2008 12:35:00 EST. Please see our terms for use of feeds.

Continue reading What the Oscar Pistorius story teaches us about investing

What the Oscar Pistorius story teaches us about investing originally appeared on BloggingStocks on Thu, 10 Jan 2008 15:30:00 EST. Please see our terms for use of feeds.

Continue reading Insiders stock up on retail stocks -- the ultimate clearance?

Insiders stock up on retail stocks -- the ultimate clearance? originally appeared on BloggingStocks on Tue, 18 Dec 2007 13:45:00 EST. Please see our terms for use of feeds.

Coach, Inc. (NYSE: COH) has taken investors' calls for greater disclosure to heart. While all public companies are required to file form 4's with the SEC after an officer or director makes a transaction involving the company's stock, Coach has gone a step further: their officers will tell you why they sold.

According to The Wall Street Journal, "In recent disclosures, Coach Chairman and Chief Executive Lew Frankfort told investors that he was holding on to shares because of his confidence in the company's future. Reed Krakoff, the company's executive creative director, reported that he was selling millions of dollars' worth of Coach stock to fund restorations to two of his homes."

The disclosures at Coach have generally cited real estate purchases as the rationale behind sales. While the company's transparency is admirable, and something I wish more companies would do, I doubt it really does much good: Since executives are always going to do something with the money from stock sales, they can just list that as a reason.

If the SEC ever does require that companies explain the motivation behind sales, I expect we'll see a lot of "CEO ... sold $124 million worth of stock to fund his retirement and diversify his portfolio" or "CFO ... sold $11.4 billion to fund his son's education at a private kindergarten".

I somehow doubt we will ever see any company, including Coach, issue a Form 4 saying that "CEO... has sold substantially all of his stock because he believes that the company has very poor prospects, and overvalued stock, and significant accounting irregularities".

Coach (COH) executives disclose reasons behind insider sales originally appeared on BloggingStocks on Wed, 19 Sep 2007 18:42:00 EST. Please see our terms for use of feeds.

A piece on FinancialWeek.com looks at an interesting conflict of interest: Companies buying back their own stock while insiders dump their own shares. It looks really bad:

...according to a Financial Week analysis of the 50 largest buybacks, at several of these companies, chief executives sold sizable chunks of stock while the buybacks were ongoing. What's more, the size of those sales exceeded, and in most cases dwarfed, their stock sales in the 12 months before the buybacks were announced.

Because share buybacks prop up the price of a stock, the effect is that these executives may be using shareholders' money to increase the price they can get for their own shares, as they dump them into the buyback. In addition, the analysis found that companies where insiders receive bonuses related to earnings per share targets are more likely to engage in aggressive buybacks. reducing the number of shares increases EPS.

Here's what Warren Buffett once wrote about buybacks:

"Now, repurchases are all the rage, but are all too often made for an unstated and, in our view, ignoble reason, to pump up or support the stock price. The shareholder who chooses to sell today, of course, is benefited by any buyer, whatever his origin or motives. But the continuing shareholder is penalized by repurchases above intrinsic value. Buying dollar bills for $1.10 is not good business for those who stick around."

This all looks very fishy, and could, and probably should, emerge as the next major corporate governance scandal.

Are insiders using buybacks as a dumping opportunity? originally appeared on BloggingStocks on Mon, 17 Sep 2007 14:51:00 EST. Please see our terms for use of feeds.

One of the best ways to find exotic, interesting investing books is to go to your local used bookstore. There, you will most likely find stacks of dusty, outdated books about investing that are long out-of-print, and no one cares. Once in awhile you will stumble on a true classic. On a recent trip to a local store, I wandered around for about 45 minutes, and then presented a dusty, paperback copy of 'Adam Smith's' book The Money Game to the owner. He was getting ready to close, and I think felt bad for me, because he just waved at me and let me have the book for free.

Before you groan and move on to the next thing: "I don't want to read a book by Adam Smith." Relax. This is not the real Adam Smith. 'Adam Smith' was a pen-name employed by George J.W. Goodman, a Wall Street money manager who did not want to be known for his expose of Wall Street.

The book was originally published in 1967, but is still one of the most entertaining reads on the market you will find. The chapter where he explains how cavemen invented technical analysis is priceless. With headlines like "The Broker as Witch-Doctor" and "What the Hell is a Random Walk," this is my all-time favorite Wall Street insider story. Read it along with Reminiscences of a Stock Operator.

Book Review: 'Adam Smith's' The Money Game originally appeared on BloggingStocks on Thu, 22 Feb 2007 13:35:00 EST. Please see our terms for use of feeds.