I usually interpret insider buying by company executives as an extremely positive development. However, I am unsure what to think of CEO Mark Smith’s recent purchase of shares of Molycorp (MCP) stock (hat tip to a friend who pointed me to an article by David White that mentioned this transaction). Rare earth element (REE) company MCP has experienced a lot of insider selling as IPO shares have exited lock-up periods. Mark Smith has been one of the sellers, releasing 259,260 shares at a total value of $13.1M in 2011.
|15-Aug-11||4,200||Indirect||Purchase at $59.02 per share.||247,884|
|15-Jun-11||110,959||Direct||Sale at $51 per share.||5,658,909|
|15-Jun-11||63,956||Indirect||Sale at $51 per share.||3,261,756|
|16-Mar-11||11,596||Indirect||Sale at $50 per share.||579,800|
|16-Feb-11||72,749||Indirect||Sale at $50 per share.||3,637,450|
|2-Aug-10||100||Direct||Purchase at $12.90 per share.||1,290|
Source: Yahoo Finance
Smith’s purchase is not only just 2% of the value of the shares he recently sold in 2011, but also the purchase price is almost 20% above his earlier sales. This combination makes his purchase both unimpressive and borderline bizarre. At best, these purchases seem to be an attempt to attract attention to the stock’s relatively low price (and valuation). Regardless, I cannot treat it as a major fresh bullish signal.
The stock has traded around or near $50 for most of 2011. When the stock finally gets back above $66 or so, I think a fresh rally will finally be underway. On the positive side, MCP has not made fresh lows for 2011, and the stock is outperforming the general market. If not for the current fears of recession, MCP could be making fresh all-time highs by now.
click to enlarge image
*Chart created using TeleChart
Be careful out there!