The common notion when the Chairman is selling sends red flags to many people that the stock is already toppish. I find this untrue from a quantitative point of view. I thought this was true too because I read in many books that I should take caution when the owners of the companies sell shares. What I realized is the more important question is why they sold the shares for and to whom they sold the shares to. What I find in my own experience is that buying private placements (hopefully at the same cost and perhaps lower) acts as a very good indicator of support or resistance depending on how the market perceives the stock. My own experience too is that the company only has a short term lull (1-3 month comatose where the stock moves maximum 10% from the placement price before ascending.) As of 2012, my biggest gains actually came from correctly buying all the placements where (INSIDERS) have sold shares. Mr Lucio Co sold 6 Bil peso worth of PGOLD at 25. JAZA group sold 13 Bil pesos of Ayala Corp at 430 but prior to the placement, were already selling from January to March 2012 billions at 400 pesos (While we were trying to buy breakout the prices from the 380 to 400 level - we always got volume primarily from the selling shareholders which turns out to be Ayala.) In fact, Gokongwei also sold 25 pesos JGS, URC at 62 as well. There are many kinds of insiders selling shares. Some are top-up placements, others are simply owners selling shares but if you look through most. Even Henry Sy who sold a placement at 700 first before the 900 price tag went up. Placements such as Melco Pcor and AGI can be seen by some people as a negative lull in the companys share prices for the next 2-3 months but it also provides an easy base to see where the action (in this case the entire volume) - support or resistance already lies. I can name instances when the Concepcion sold RFM at 6 that brought about the top in that stock for 2013 but there are also numerous instances when shares were sold by insiders that provided a good avenue to buy the shares. To put it mildly, I find no conclusive evidence that when insiders sell that the shares are toppish. The other way around, which is when insiders are buying ---- are more important indicators to me to say that the company is bottoming out because when insiders are buying the shares, they normally have a good reason too and they send the downtrend to stop temporarily (take the case of MWC when AC purchased at 20 bucks the Mitsubishi UFJ stake.) Good morning. (This is just my own opinion and I wanted people to essentially learn the differences between placements) You may check previous Philequity corner article - An Avalanche of Overnight Placements for year 2012.) Too many placements can kill the markets liquidity but as you can see, our market today is highly liquid. Any pullback might only send us to 6650 should we actually correct deeply on August.
Posted on: Sun, 13 Jul 2014 02:20:38 +0000
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