Usually the lists of the largest insider sales published by the Wall Street Journal or Barron’s don’t mean anything. This reason for this is that insider sales usually are done for diversification or liquidity. Stocks sold by insiders don’t go down, on the average. However, recent research on insider selling shows that stocks sold under the 10b5-1 plans have large negative abnormal returns. The magnitude of the abnormal returns is about 70 basis points per month calculated by using Carhart’s four factor model. We compiled the list of 7 stocks insiders couldn’t wait untill 2011 to sell under 10b5-1 plans:
1. Microsoft (NASDAQ:MSFT): Kurt Delbene and Steven J. Sinofsky, officers of Microsoft, were exercising their options at $25.14 and selling them during the past week. Two weeks ago, Chief Research Strategy Officer, Craig J. Mundie, exercised 248 thousand options and sold them at $28 a pop. In November, Bill Gates sold 8 million shares under a 10b5-1 plan. However, the biggest insider sale was made by Steve Balmer, who sold 75 million shares and netted nearly $2 Billion.
2. International Rectifier Corporation (NYSE:IRF): International Rectifier’s Chief Operations Officer, Michael Barrow, sold 7,915 shares at prices between $29.78 and $29.87. Last year, insiders in IRF were buying when the stock price was around $14.
3. Peet's Coffee & Tea Inc (NASDAQ:PEET): Patrick Odea, CEO of Peet's Coffee & Tea, has been exercising his options and selling stock during December. Tom Cawley, CFO of Peet's Coffee & Tea, also exercised and sold 29,000 shares and netted nearly $700,000.
4. Advent Software Inc (NASDAQ:ADVS): John P. Brennan, SVP Human Resources of Advent Software, exercised and sold 7,500 options. The net proceeds of this transaction was nearly $300,000. Stephanie Dimarco, CEO of ADVS, sold 20,000 shares under a 10b5-1 plan, netting more than $1 Million.
5. Salesforce.com (NYSE:CRM): Marc Benioff, CEO and Chairman of the board of CRM, sold 800,000 shares since September 1st for a total of around $100 Million. Marc Benioff still has some 10 million shares and he’s been consistently selling about 10,000 shares a day under a 10b5-1 plan. He had more than 13 million shares at the beginning of 2010. So, in one year, he disposed of 3 million shares. George Hu, EVP of Marketing of Salesforce.com, has been exercising his options and selling them under a 10b5-1 plan as well.
6. Morningstar Inc (NASDAQ:MORN): Tao Huang, COO of Morningstar, has been exercising and selling 100 shares a day under a 10b5-1 plan. Another insider, Elizabeth Kirscher, was doing the same thing on a larger scale in December.
7. Alpha Natural Resources (NYSE:ANR): Three insiders of Alpha Natural Resources, Kevin S. Crutchfield, Eddie W. Neely, and Vaughn R. Groves sold shares under 10b5-1 plans on December 30th. Michael R. Peelish exercised 20,000 shares and netted more than $1 million on December 29th.
Disclosure: I am long MSFT.