Insider Buying Strong, but Net Honchos Bail

Don’t tell corporate insiders the stock market is overpriced. Share-buying activity by insiders has remained strong lately even as the market has hovered at high levels, data show.

Statistics aren’t yet available on how insiders have reacted to the market pullback that began last week. But in previous weeks, executives and other insiders continued to scoop up shares of their own companies at a brisk pace, according to CDA/Investnet, a Rockville, Md., service that tracks insiders.

“There are a lot of buyers out there,” said Nancy Fedorowicz, a CDA research analyst.

In data filed with federal regulators over the last five weeks, insider purchases topped sales by a 10-to-9 margin. Because many insiders receive stock options as part of their compensation and sell some of those shares to finance personal purchases, insiders typically buy shares only half as frequently as they sell.

When insiders sell stock, they must file documents detailing those trades with federal regulators by the 10th of the following month.

In one warning sign, however, the very latest filings--those received last week, mostly reflecting trading activity in January--showed many more shares being sold than acquired, according to CDA/Investnet. The 298 buyers purchased more than 2.2 million shares. The 415 sellers, however, unloaded more than 18.6 million shares. Whether that is more than a one-week interruption of the buying trend remains to be seen.

Insiders at many Internet-related companies in particular have been aggressive sellers lately, in part because self-imposed sales restrictions known as “lockups” have expired. These are promises by top insiders to refrain from selling shares immediately after a firm’s initial public offering.

Among Net stocks, @Home, Inktomi, NetGravity, Excite, EarthLink Network and Amazon.com have seen heavy insider selling in the last three months, CDA/Investnet data show. And in a continuation of sales over the last year, two top executives at Lycos, which said Tuesday that it plans to merge with USA Networks, filed to sell nearly $12 million in stock in January.