Why 'Insider Selling' Can be Misleading: Factset Shares Fall on Nonsense (FDS)

Eddy Elfenbein submits: FactSet's (FDS) stock is down because the co-founder, Charles Snyder, sold 1 million shares. Note the tense. He already sold the shares. If anyone is keeping track, the company has about 49 million shares outstanding. Synder's sale represents a tiny portion of the company.

It was only a week ago that the stock jumped on its earnings news. There's nothing wrong with Mr. Snyder cashing in. After all, there are a zillion reasons to sell a stock. Maybe he wants to diversify. It's not necessarily because management thinks that the shares going to tank. Snyder still owns over 4 million shares.

It's very easy to draw the wrong conclusions from insider selling.

FDS 1-yr chart:

Comments

[NO DooDahs:]

The stock appears to have topped. Note the slope of the downslide after the earnings spike is the same as the slope of the downslide before the earnings spike. That downslide is why Chuck sold out 20% of his position.

The resumption of the downslide isn't caused by his selling - his selling is caused by the downslide. You've got negative divergence on the PPO and RSI, the stock has been in distribution since the first of May, and don't forget the stock has almost doubled in the last 52 weeks and is a almost triple in the last 3.5 years - it's just time to take profits.

Per Nick's comment - Chuck can't do much about stock performance. He may be in a position to do something about COMPANY performance, but that's not the same thing. In regards to stock movement, he's along for the ride, just like any retail investor ...

2006 Jun 29 07:47 AM