A new letter:
Phil,
My question:
I was looking at the MSN investment site tonite and noted on the insider trading link that every single insider who has traded [WFMI] has sold-- millions of dollars worth of shares. Am I missing something or didn't you say that when the insiders are selling it's time to get out?
Sincerely,
Greg K.
Omaha
Greg has a good question: A lot of Whole Foods insiders, including the President, are selling stock. The President dumped 50,000 shares at $135. And that was most of what he owned. Is the guy worried? Does he know something we don't know? Insider selling is always a serious red flag that screams "get out" unless there are mitigating circumstances.
One of the most mitigating circumstances of all is knowing that WFMI employees get stock options as part of their compensation. This was very common in the 1990's as a way to attract good people and keep them. It's going out of favor now because companies are having to expense the options, which hurts their earnings.
Point is this: when people get stock options as part of their compensation package, they are not really investors in the business. They sell those shares often as part of getting paid. You see that all the time in high tech businesses. For example, Bill Gates sells stock in MSFT all the time to fund his charities. Pretty much meaningless.
Now go play!
Phil
