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OklaBoston (67.18)

Insider ownership vs mutual fund ownership

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January 20, 2010 – Comments (6)

I'm wondering how many people here would prefer to see high INSIDER ownership to high mutual fund ownership in a stock they're considering investing real money in.

Insiders, Ive been led to believe, are in a much better position to judge a company's long-term potential than mtal fund managers. In addition to being in better position to insure that the company actually reaches it's optimum potential. 

Admittedly  they're also in position to sabotage the company, but doing so would be against their own long-terminters, wouldn't it? 

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6 Comments – Post Your Own

#1) On January 20, 2010 at 5:07 PM, dudemonkey (38.86) wrote:

I love to see significant insider ownership because it tends to lead to a scenario where the interests of management and shareholders are aligned.  Investors refer to this as "the opposite of what Goldman does."

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#2) On January 20, 2010 at 6:22 PM, brickcityman (< 20) wrote:

Depends ...

 

Whats good for a company may not be good for a stock and vice-versa...

 

I think insider trends, and compensation balance, also come into play...  If insiders are generally "buying and holding" then that could be bad.  At least from a stock perspective, because their management style might be one that rewards the company in the long run, and is hence punished by Wall St. in the shortrun. 

 

Meanwhile, more active insiders are more concientious of stock performance and may be more motivated to reward Wall St. (and us) at the expense of long term prospects for the company.

 

Don't get me wrong, I am not  trying to say that these interests are always diametrically opposed, just that in the range of possibilities out there seldom is anyone given decision optimized for all stakeholders.

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#3) On January 20, 2010 at 6:40 PM, blesto (31.79) wrote:

I like to see good insider ownership. I watch to see if they're direct buys, exercising options and then selling or holding etc.

Even if they sell, do they still retain a significant number of shares? Sometimes they need to purchase that extra car or boat or maybe their kid's college tuition bill.

Institutional holdings can be a good sign to see depending on the institution.

I would personally like to see this kind of info about insider trading listed somewhere in the Fool's quote or stats of companies.

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#4) On January 20, 2010 at 9:23 PM, ReadEmAnWeep (79.75) wrote:

I would prefer to see insider ownership.

"it tends to lead to a scenario where the interests of management and shareholders are aligned." as dudemonkey said. 

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#5) On January 21, 2010 at 12:55 AM, OklaBoston (67.18) wrote:

I do look every now and then at websites that show recent insider activity. And I do like to see evidence that the insiders are holding on to at least half the shares they acquire via that route, rather than selling them the same day they exercise the options, a much more frequent phenomenon.

But the only site I am aware of that tells you what percentage of the Co. they own on a timely basis is the "Guru Analysis" feature at http://www.nasdaq.com.  If you know of another site that does that please tell me about it. I'll make a point of checking it out.

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#6) On January 22, 2010 at 3:37 PM, OklaBoston (67.18) wrote:

I'm with blesto in wanting to see stats about insider ownership here at Motley Fool. Especially stats about what % of the company the CEO, COO, and CFO collectively own. And if, as sometimes happens, the same person holds more than one of those offices.

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