This week's Question of the Week for Phil Town:
Q:
Hello Phil Town,
I'm a reader of your book from Kuwait. I'm a complete novice in the stock market, I'm trying to learn while reading your book. I never seriously considered the stock market until I read your book, thank you.
I was checking out Western Digital (WDC) on MSN money and I was amazed by what I saw in the insider trading page. Is this really a good example of suspicious selling or is this normal?
What is the time frame that we should use when calculating the percentage of stocks sold by the company directors? I mean old sales don't count right? But how old?
A:
Hi Ahmad,
When I see you guys digging into tech companies my first question for all of you is: do you really truly understand this business?
The second question is, do you really believe that it has a big enough MOAT to make it certain that it will be around in ten years? Once you get those two right, the rest is pretty easy.
So assuming you are a hard drive guy and know your stuff and you like WDC (although it appears on a quick glance that it's at Sticker, though I'm just going off of default numbers that could be way too low), all this insider selling might be a big to-do about nothing.
Tech biz plays with stock options a lot. It looks like these guys had options at $13, exercised them (perhaps before they were to expire) and sold at $20. And it drove the stock down to $17. I'd just call them and hear the corporate line but it could be innocent.
Now go play.
