Friday, July 26, 2002

Bulls On The Inside

Wall Street has taken BellSouth's stock to the shed lately. Since topping out at $43 in September, shares of the Atlanta-headquartered Baby Bell have lost nearly half their value.

Insider activity, however, tells a less grim tale. Over the past six months, insiders have scooped up 10,000 BellSouth shares. Amount of insider selling: none.

That's a drop in the bucket--BellSouth has nearly 1.9 billion shares outstanding--but it's an encouraging sign. Contrast that to another Baby Bell, SBC Communications, where insiders have also bought 10,000 shares but dumped 211,000 during the same period.

Of course, the motives for insider selling aren't always ominous--an insider may be financing a kid's college education or building a new house. Still, a predominance of insider buying is at the very least reassuring, if not a positive reflection of the company's outlook.

Moreover, net insider buying often signals an undervalued stock. BellSouth, for example, goes for 1.8 times latest 12-month sales versus a five-year average price-to-sales (PSR) multiple of 3.3. And BellSouth shares sell for just ten times projected 2003 earnings.

Full story at Forbes.com