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With Investor Phil Town

Rule #1 Question of the Week: Tech Businesses and Stock Options (WDC)

Phil_town_140 This week's Question of the Week for Phil Town:


Hello Phil Town,

I'm a reader of your book from Kuwait. I'm a complete novice in the stock market, I'm trying to learn while reading your book. I never seriously considered the stock market until I read your book, thank you.

I was checking out Western Digital (WDC) on MSN money and I was amazed by what I saw in the insider trading page. Is this really a good example of suspicious selling or is this normal?

What is the time frame that we should use when calculating the
percentage of stocks sold by the company directors? I mean old sales
don't count right? But how old?


Hi Ahmad,

When I see you guys digging into tech companies my first question for
all of you is:  do you really truly understand this business? 

The second question is, do you really believe that it has a big enough
MOAT to make it certain that it will be around in ten years?  Once you
get those two right, the rest is pretty easy.

So assuming you are a hard drive guy and know your stuff and you like
WDC (although it appears on a quick glance that it's at Sticker, though
I'm just going off of default numbers that could be way too low), all
this insider selling might be a big to-do about nothing. 

Tech biz plays with stock options a lot.  It looks like these guys had
options at $13, exercised them (perhaps before they were to expire) and
sold at $20.  And it drove the stock down to $17.  I'd just call them
and hear the corporate line but it could be innocent.

Now go play.

Phil Town

Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.