[CANSLIM] Management Ownership/Fund Ownership.

From: Dave Cameron <dfcameron@yahoo.com>
Subject: [CANSLIM] Management Ownership/Fund Ownership.
Date: Sat, 20 Apr 2002 20:07:09 -0700 (PDT)

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There was a thread yesterday/today about whether 81% fund ownership
was too high.   In my opinion it is.   My best winners were stocks
that had around 20% fund ownership when I got in (or at least
reported as such by DGO).

Yet, I have a potentially relevant sidebar on management ownership.  
In general, management ownership tends to be a good thing.   When the
top managers in the company have similar financial incentives to the
investors (because they become investors), then they are more
motivated to take actions that help out the stock price.   Yet, there
are a few exceptions:

1.  I've owned stocks where management had a lot of stock options -
say to buy at $20, when the stock was $25.   After a bad quarter, the
stock dropped to $16.   After another bad quarter, the stock dropped
to $11.   The board of directors voted to reprice the management
stock options from $20 to $8.   The stock promptly dropped to $8. 
This ended up being one of my biggest losses - er, in that I rode it
up and all the way down.

2.  I've owned a stock that had 75% management ownership, and 15%
institutional ownership.   The problem was that 67% of the 100% (or
the vast majority of the 75%) was owned by the chairman and CEO.   He
wasn't drawing a salary.   Yet... he didn't seem interested in
keeping the stock price up.   The stock went from being a CANSLIM
stock - to falling off the face of the earth - and is now about 80%
below the initial pivot point.    I was unable to get out of this one
quickly, because the float was so small that the stock gapped quickly
(in both directions).

So...management ownership may not always be a good thing.



=====
Dave Cameron
dfcameron@yahoo.com

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