(By Rich Bieglmeier) Every week, iStock monitors insider buying to see if anything catches our attention. We found purchases of interest in Monday's rundown, especially after some further review.
To start the week, Christine Lee Gartner bought 27,400 shares of Pacific Sunwear of California Inc. (PSUN). Following up on the Sr. VP's putting nearly $50,000 on the table, iStock found that since May 31, 2012, four PSUN insiders bought 132,400 directly in the open market, for a total approaching a quarter million dollars.
Interestingly, the only management team member to buy is Ms. Gartner. Obviously, folks with insight into the day-to-day operations have a better understanding of future prospects than outside directors.
iStock likes to see what sort of track record executive insiders have with previous purchases or sales. Do they have a history of good timing and getting it right or are they just zealots?
In the past, the senior veep mostly sold stock or acquired it at a minimal cost, most likely through exercising company issued options. In essence, it's free money and a form of compensation - so, the fact that this time around involved real cash, stands out.
We will continue to pay attention to see if additional PSUN team members step up with dollars in the days and weeks ahead.
In the meantime, Pacific Sunwear's stock chart shows that its price may have bottomed out between May 14 and 17, when the stock traded from $1.17 to $1.20. Clearly, iStock would prefer to own the stock 80 cents cheaper than it is today; however, Christine Lee Gartner stepped in at $1.81. So, we are not that far away today.
According to iStock's technical take, $2.50 could be in PSUN's not too distant future, and 50 cents on a $2 stock is still a very profitable move from here. If buyers can pull shares above $2.50, then $3 would be the next target.
Except for selling for 15 cents for every dollar per share in revenues, fundamentally, there's not much that we like about the California lifestyle's valuations. However, if Pacific Sunwear of California Inc. (PSUN) manages to turn the tide of negative financial news, 23% of PSUN's float (stock available for trading) is sold short. Any good news could cause a nifty short squeeze.
Our bet is that Christine Lee Gartner has 50,000 reasons to believe better days might be ahead.