Wednesday, November 14, 2007

RMIX CFO buys 15,000 shares

I got interested in betting against MLM when I noticed the CEO selling shares. He not only sold, but exercised relatively new options that still had several years till expiration. It’s very rare to see someone sell before an option expires as the hope is always that the company will have several more years of quality earnings and increases in share price. Plus the investment continues to compound tax free. In the MLM CEO case he accelerated the payment of tax by exercising and selling. The only conclusion I could draw was that he thought the stock price had gotten way ahead of itself and there was no need to wait for expiration and run the risk of the share price decreasing with a slowing economy.

The opposite happened yesterday. The CFO of US Concrete bought 15,000 shares using his own money. The size of the buy was significant and no one should know the company’s financial situation better than the numbers guy. When CPAs buy, pay attention.

In week or so since I bought some shares as a quasi-hedge on my MLM puts, RMIX is down about 20% to $4!! Luckily for me MLM also fell and I closed them out at the $120 level for a 70% gain since they were put on in April. The RMIX losses reduced that gain, but the combined plan worked fine. I still think the trend is down for MLM based upon valuation and I’ll buy puts again soon.

I didn’t close out my RMIX position when I closed the MLM puts so I’m now long US Concrete and will add to that position after the recent decline and the CFO’s confidence.

No comments:

Add to Technorati Favorites