Investors are already pelting me with questions about the recent insider selling in GLUU shares. No offense, but 10b5-1 insider selling is almost never a reason to get frightened about a stock. In fact, if the fundamental story looks good, 105b-1 selling should be ignored…100% of the time.
If you go to InsiderCow, enter a ticker symbol to see the insider trading activity for the corresponding company. On the far right of each company's page, there's a column called "Details". If you click the "View" button for any transaction, the website will display the SEC document that was filed to disclose the transaction (a Form 4).
Box 3 of the each Form 4 shows an alphabetical transaction code (a code key can be found on Wikipedia), along with a numeric code in parenthesis denoting the reason for the transaction (the numeric key code can be found at the bottom of the Form 4. If the code is (1), it means that the transaction was completed under Rule 10b5-1 of the Securities Exchange Act of 1934.
According to Investopedia, a 10b5-1 plan enables "major holders to sell a predetermined number of shares at a predetermined time. 10b5-1 plans are used by many corporate executives in an attempt to avoid accusations of insider trading." In other words, it is basically an automatic wealth diversification program which has nothing to do with whether the company is doing well or not…a non-event.
As Peter Lynch (one of my early Wall Street idols) once said, "There are many reasons insiders sell, but only one reason insiders buy." In other words, insider purchases are usually bullish, but in a vacuum, insider sells are meaningless data points.
If anything, if the stock falls on such news, it's almost always a buying opportunity. That is the case here.
In other words, the 10b5-1 selling has zero impact on my thesis or thinking on GLUU. Investors need to get used to the fact that my articles don't have an expiration date, nor does my thinking change with each silly and minor data point. Deer Hunter falling 2 spots in the rankings doesn't change the ONE most important thing about GLUU -- its new monetization platform is a major money maker.
Thus, what I have written about GLUU will be how I feel NO MATTER WHAT HAPPENS, barring ONE exception -- if the monetization platform starts to fail. So far, the opposite has been true. The platform is performing better than I imagined.
So, do yourselves a big favor and calm down. :)
I only donate a certain number of hours to Seeking Alpha each week. Having to write articles like this takes time away from finding a new triple. Thus, when your confidence in one of my picks feels shaken, go back and read Tripling Your Money: Don't Get Shaken Out. Alternatively, when insiders sell, follow the instructions I provided above and confirm for yourself that the selling is just a harmless 105b-1 program at work.
...and yes, >sigh< if you need to hear it again:
Shares of GLUU are still poised to triple.
Happy New Year Everyone! :)
April 2014 Update -- The article above was written in late December 2013. Let's see what GLUU did after all the insider selling started:
As you can see, the stock went from $3.70 to $5.70, powered by an incredibly strong quarter. If you need any further proof that insider selling should be ignored, I can't help you ;)
Now, all of that being said, notice that the stock hit the top-end of my risk/reward chart channel (the line above the stock). That was a signal to hedge your position (by selling calls, buying puts, or shorting the Russell) or take some profits off the table.
The pullback that ensued was not a function of the insider selling (as discussed above), but rather the fact that the stock got high in its risk/reward channel at a time when the market was getting ready to pull back.
Disclosure: I am long GLUU.