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What the New Guru of Insider Trading Likes Now

By Dr. Steve Sjuggerud
Tuesday, November 13, 2007

Who likes shares of banks? Mark LoPresti, for one...

Going against popular opinion, Mark LoPresti just told Barron's that he's bullish on bank stocks. It's no gut feeling here... Mark's work is backed by the most comprehensive data crunching in the financial world...

Never heard of Mark LoPresti?

Most people probably haven't. But you ought to know what he does...

For a little background, 13 years ago, Mark and I worked side by side... We specialized in international stocks and bonds. We'd pick up each other's phones when necessary. We worked hard (Mark worked harder than me), and we learned a lot.

We both moved on. I've seen him many times in recent years... mostly on CNBC...

You see, Mark is now the vice president of quantitative research at Thomson Financial's Proprietary Research Group. Thomson Financial, if you don't know, is the keeper of the most comprehensive databases in the investment world. And for an astronomical amount of money, Thomson will let you access its work. (We know... we pay a fortune to use Thomson's Datastream product.)

Mark LoPresti is in the extremely enviable position of being able to play with Thomson's data all day long for free. All Thomson asks is that Mark share his findings with Thomson's high-paying customers.

Mark prefers to dig in Thomson's databases of corporate insider trading activity. In plain English, when a company's CEO buys stock, Mark wants to know about it. Thomson has comprehensive databases on insider activity, so Mark has figured out what works and what doesn't.

He's made many interesting discoveries. For example, in his Barron's interview, Mark said that tech CEOs are not particularly good traders of their own company's stock. Meanwhile, hedge-fund managers who are also insiders are generally pretty good buyers. Mark also mentioned that even though shares of energy stocks have soared, the insiders at energy companies haven't sold. He takes this as a bullish sign for energy stocks.

But what interested me most was Mark's opinion on financial stocks...

I talked to Mark yesterday on the phone. The efforts of his number crunching showed...

"Steve, so far in November, out of 86 regional banks, we've seen 136 insider net buyers, versus only 14 insiders as net sellers. When you get down to 10 to 1 like this, that's extremely bullish."

"When you look at valuations, financial stocks are cheap. And when you look at the tenure of banking executives, they tend to be longer versus other industries. So these guys should have superior knowledge of their industries, and they tend to think longer term. These things don't mean that bank stocks have to jump now. But the story is compelling here."

Mark LoPresti – Thomson's insider activity guru – is bullish on regional banks. I'm bullish, too. In fact, even before I spoke with Mark, I had started recommending shares of small banks (the smaller the better) for my paid subscribers.

And Stansberry's own Graham Summers – editor of the Inside Strategist – just started getting bullish on a regional bank in his latest issue.

The "dumb" money is fleeing regional bank stocks. But the "smart" money – the insiders – is buying. I think it's a great move to be right beside them.

Good investing,


Market Notes


The Chinese investor is about to learn what Warren Buffett has known for years... that owning airline shares may be the worst financial decision a person could ever make. We present China's largest air carrier, China Southern Airlines.

Like all Chinese assets, China Southern went "parabolic" this year... tripling its market cap in just five months. This growth comes in the face of the company's enormous fixed costs, laughable profit margins, and a paltry return on assets. The $4.5 billion company boasts only $300 million in cash and $2.9 billion in long-term debt.

What makes China Southern better than American carriers Southwest, JetBlue, and Delta - all of which have superior margins? Of course it has better growth... it's in China. It's also in one of the greatest stock booms in history. But as our chart today shows, the boom is busting...

China Southern has collapsed 46% from September highs. But keep in mind – Chinese stocks have enjoyed one of the greatest speculative runs of all time, and valuations are still ridiculous. As the Chinese stock mania ends, China Southern could easily slide another 46% in a broader correction. After all, this is an airline stock...

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