Ross Stores CEO Dumps 1/5 of Holdings

This is really a very short article, and I should say at the outset that I'm short the stock.

Now, having admitted that, let me tell you why. This afternoon around 14:30, Michael Balmuth, the CEO of Ross Stores, sold approximately 100,000 share - or roughly one fifth - of his holdings. The filings can be seen on the SEC site.

His holdings over the past 7-8 months can be viewed here.

I haven't had time to do all the math on this, but roughly speaking, the situation seems to be this:

1) The sale is not the result of option exercise. More accurately, the shares sold were acquired through option exercise in March.

2) The sale is part of a 10b5 Plan, but no date is given for the plan in the filings. Make of that what you will.

3) He was long 300,000 shares until 03/22, when he exercised roughly 250,000 options (or 2500 if you like) resulting in a total position of 550K. On Oct. 15, he sold a quarter of that.

A sale this large has to have a reason behind it in my opinion. It would be nice if someone could figure out the event that triggered this, but I haven't had any success.

At some point it would be interesting to look into the exact nature of these plans. Basically the SEC will allow anything that can be interpreted as a Turing machine (a computer). That's to say basically anything is allowed. So I don't attach to much weight to the "hands off" part of the sale.

So these are my reasons for shorting. I think they're good - but you have to make the call.

Disclosure: Author has a short position in ROST

Comments

[Dan Jacome:]

Margaret Mager over @ Goldman has ROST as one of her top LBO picks....

The sales you mention are planned, no where near as significant as open market buying and selling.

A more compelling insider activity-in-the-retail space play is BKS. CEO Riggio hasn't bought stock in the amounts he is currently buying since Aug 2005.

He netted 17.4% on average in the ensuing 6 months...this guy knows what he is doing.

2007 Oct 19 03:28 PM

[David Hyder_:]

Thanks for your comment. I realise that the sales were planned, but when we are dealing with a sale of this magnitude, they reflect a willingness on the part of the CEO to divest himself of such a position.

Which makes me wonder how much truth there can be to the LBO rumours.

Nonetheless, thanks for bringing this to my attention.

David H.

2007 Oct 29 07:50 PM

[David Hyder_:]

Well, here we are at the middle of December, and I think it's clear that the short was a good one. No takeover either for that matter.

David Hyder

2007 Dec 13 07:44 AM