US executives are selling their companies' shares at the fastest pace in 10 months, led by Microsoft Corp chief executive Steve Ballmer, AOL Time Warner Inc director Ted Turner and Dell Computer Corp chairman Michael Dell. Analysts say the moves might foreshadow a market decline.
In the past eight weeks, executives, directors and big individual investors made 3.1 sales for each purchase, according to Vickers Weekly Insider Report. That's the most selling activity by insiders since July.
"That is a little bit of a red flag," said Phil Larkins, who managers US$330 million in Atlanta for Northern Trust Corp.
"Insiders aren't enthusiastic about where stocks are going over the next six to 12 months," he said.
The selling surge comes as the Standard & Poor's 500 Index has risen 12 percent this year. Yesterday the Dow Jones Industrial Average closed above 9,000 for the first time since Aug. 22.
Meanwhile, earnings growth among Standard & Poor's 500 companies is slowing to an average 5.8 percent this quarter, about half the rate forecast at the start of the year, according to analysts surveyed by Thomson Financial.
The rise in selling is similar to a wave of sales a year ago, which preceded a market tumble.
In May last year, there were four purchases for every sale by officers and directors, who are required to disclose the transactions to the US Securities and Exchange Commission (SEC). That preceded a 27 percent drop in the Standard & Poor's 500 over the following eight weeks.
Last week, there were 4.2 sales for every purchase, according to Vickers, which tracks SEC filings.
"Insider selling is increasing at a fairly unsettling pace," said David Coleman, editor of Vickers.
"Insiders know more about the stock than anyone else. Those who ignore insiders' signals do so to their own detriment," he said.
Coleman said he's selling stocks in his publication's model portfolio, which has risen 51 percent this year by tracking stocks where company officers have been making purchases.
Executives have many reasons to sell shares -- they plan to buy a house, diversify their investments or feel the stock may have reached a peak.
Selling has been heaviest among computer-related companies and software makers, analysts said, reflecting sellers' desire to lock in profits even as demand among businesses remains sluggish.
"It is the right time to be selling," said James McGlynn, who helps manage more than US$5 billion in investments for Summit Investment Partners.
"Tech stocks are overpriced," he said.
The NASDAQ Composite Index, which has gained more than 22 percent this year, trades at 39 times this year's estimated earnings, or more than twice the Dow Jones average's multiple of 18.
Among recent sellers, Ballmer sold 55.4 million shares for US$1.34 billion last month, for an average price of US$24.20 a share, according to the Washington Service, which tracks SEC filings. It was his first sale in 12 years.
Ballmer, in a statement, said he sold shares to diversify his investments and is "as committed to Microsoft as ever."
He holds about 411 million shares, according to the Washington Service.
Shares of Microsoft, the world's largest software maker, have fallen 3.8 percent this year after dropping 22 percent last year. They fell 1 cent on Wednesday to US$24.87 in NASDAQ Stock Market trading.
Turner, former vice chairman and AOL Time Warner's biggest individual shareholder, sold 60 million shares in the media company for US$783.6 million at an average price of US$13.06 a share. In a statement released by the company, Turner said he sold the shares to diversify his holdings and "remains supportive of management."
The sale followed Turner's decision in January to step down as vice chairman after criticizing America Online Inc's purchase of Time Warner Inc. as a "big mistake."
Shares of AOL Time Warner, the world's biggest media company, have risen 19 percent this year after falling 59 percent last year amid SEC and Justice Department investigations into how its America Online unit accounted for revenue.
They rose US$0.32 on Wednesday to US$15.53 in New York Stock Exchange composite trading.
Dell sold 10 million shares for US$296.8 million at an average price of US$29.68, according to the Washington Service.
The executive sold to diversify his investments and "remains the largest shareholder in the com-pany," spokesman Michael Maher said.
Dell is the company's biggest shareholder, with 316 million shares worth about US$10 billion.
Shares of Dell, the world's second-largest personal-computer maker, hovered around US$25 for more than two years as investors said the price-earnings ratio made it an expensive stock. As the Round Rock, Texas-based company's sales increased and it gained market share, investors have pushed its share price as high as US$32.78 on May 15, its highest since 2000.
Yesterday, the company rose US$0.70 to US$31.70.
Analysts said that part of the selling reflects computer-related companies' practice of compensating executives with stock options rather than cash.
Among the other big sales in the past two months, E.W. Scripps Co director Charles Scripps, the company's former chairman, sold 7 million shares for US$528.6 million at an average price of US$75.51, according to the Washington Service.
Scripps's shares were sold through a trust in a public offering as part of a "long-term effort to diversify the trust's assets," the company said in a statement.
Shares of Cincinnati-based Scripps, a publishing company that owns the cable-TV channel Food Network, have climbed 15 percent this year after gaining 17 percent last year. They rose US$1.04 on Wednesday to US$88.44.
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