Stock buying and selling habits of company insiders give investors insight on corporate health - and appear to show some publicly traded firms in northwest Ohio and southeast Michigan are on shaky ground.
So is the stock market.
Insiders of Toledo's Owens-Illinois, Inc., the latest records show, haven't reported any trades this year, seemingly indicating they're not bailing out but aren't confident, either. Insider sales at Cedar Fair, L.P., of Sandusky, far outpace purchases; and La-Z-Boy, Inc., of Monroe, had the next highest such estimated ratio among the area's 15 largest public companies.
Evaluating trading by company executives, directors, and other insiders is important, said Gary Sliemers, senior vice president at A.G. Edwards' Toledo office.
“I'd much rather have them buying their company stock than selling, there's no question about it,” he said. “If [an executive is] in there buying, you know he believes in it.”
Yet across the country, in May corporate insiders sold $34.11 in their companies' stock for every dollar's worth they bought. That was more than double April's $15.98 sold per dollar's worth bought.
May's ratio is the most bearish since Thomson Financial/Lancer Analytics began tracking trades reported to the U.S. Securities and Exchange Commission five years ago, said Lon Gerber, the Scottsdale, Ariz., firm's research director.
Company leaders shouldn't sell stock, even if they need money for their children's college tuition or other expenses, said Nell Minow, editor of The Corporate Library, a web site that publishes chief executive employment contracts and other information about publicly traded corporations.
“If you've got the stock, you can go to the bank to borrow against it,” said the admittedly hard-line Ms. Minow.
“You hang onto it from the day you get it until three years after you leave. ... The only way to make them think like shareholders is to make them shareholders.”
The nation's insider sales volume for May, the most recent compilation available, increased 81 percent from April to $5.2 billion. That is the highest monthly volume since August, 2000, and is an indication the market could do poorly in two to three months, as it did after that month last year, Mr. Gerber said.
“It's just not an encouraging number to see,” he said last week. “The level of buying is very low, and the level of selling has sort of changed.”
Four of the area's 15 largest public companies - Cedar Fair, La-Z-Boy, Findlay's Cooper Tire & Rubber Co., and Toledo's Libbey, Inc. - have had higher insider sales than purchases this year. Conversely, Toledo's Dana Corp.; Maumee's The Andersons, Inc.; Bowling Green's Sky Financial Group, Inc.; and Toledo's Manor Care, Inc., have had higher insider purchases than sales, according to SEC reports.
Cedar Fair and La-Z-Boy had the largest estimated sell-to-buy ratios, with the Monroe furniture maker having by far the highest number of trades overall.
At Cedar Fair, lawyers have advised executives to do trading during the off season for amusement parks, to eliminate the appearance of having an unfair advantage, so transactions are concentrated during winter months, said Brian Witherow, head of investor relations. Cedar Fair's ratio of sales to purchases so far this year was about $12 to $1.
Some of the amusement park firm's insider stock sales were by James L. Miears, who retired as executive vice president and general manager at the end of last year and sold 14,600 shares for $295,962 in April. Other sales were tied to tax penalties, Mr. Witherow said.
Plus, Cedar Fair executives can buy stock through payroll deductions, and records of those trades haven't shown up yet, he said.
“Those payroll purchases don't get really reported until the end of the year,” he said. “A lot of those buys are reported in a one-lump-sum reporting.”
At La-Z-Boy, all of the about $33 million, or nearly 2 million shares, in divested stock was from Monroe Bank & Trust, which holds and manages stock for clients.
The bank declined to disclose why the La-Z-Boy shares were sold, but various reasons, including estate taxes, come into play with such moves, said Herbert Lock, senior vice president of investment and trust. The bank recommends the cross-town firm's stock on its investment list and holds about 9.8 million shares.
Monroe Bank's stock sales are not a concern at La-Z-Boy because other investors have increased their stakes in the furniture maker in the last couple of years, said John Ong, director of investor relations.
“It's not to say it's not significant or material, but there's lot of other changes going on,” Mr. Ong said. Excluding Monroe Bank, he said, La-Z-Boy's 10 largest shareholders increased their combined holdings from 12 percent at the end of 1998 to 33 percent by the end of March, the latest numbers available.
A.G. Edwards' Mr. Sliemers warned that investors need to analyze circumstances surrounding insider trades. Executives, he said, need to diversify their portfolios as much as anyone else and take their personal wealth into consideration.
At one of three of the 15 locally publicly traded companies without insider trades this year, O-I, stock price dropped nearly in half from a year ago as concerns over asbestos liabilities linger. The value of insider holdings, including the nearly 792,000 shares owned by Joseph Lemieux, chairman and chief executive officer, also have dropped in half.
A spokesman for the area's second largest firm did not return calls seeking comment last week.
Tecumseh Products Co., of Tecumseh, and Chase Industries, Inc., of Montpelier, which are smaller than O-I and are closely held, have not reported insider trades this year. Insiders at Toledo's Owens Corning, which declared bankruptcy last year to manage asbestos liabilities, have reported only sales this year.
Toledo's Health Care REIT, Inc., Bryan's Ohio Art Co., and Monroe's MBT Financial Corp. - which is Monroe Bank & Trust's holding company - had insider buys but not sales this year.
Dana, by far the area's largest company, had the highest rate of purchases to sales. Insiders bought 19,820 shares worth about $167,700 and sold 700 shares worth about $14,000.
Of companies with a higher number of purchases than sales, Manor Care insiders reported the highest amount of trades. Insiders sold about 235,000 shares for an estimated $5.7 million but bought 812,000 for an estimated $6.6 million.
Paul Ormond, Manor Care's president and chief executive, alone bought 575,000 shares and sold 75,000. Some of those purchases were options. O-I's Mr. Lemieux, a Manor Care director, exercised options on and sold 9,000 Manor Care shares in February, making $136,260.
Some Manor Care insiders were running out of time to purchase options and were selling shares to buy the reduced-price stock, said Manor Care spokesman Rick Rump.
“In some cases, they're selling shares to pay the option price,” he said. “You still have to satisfy the option price.”