The annual 11-K reports for 2009 are beginning to show up in recent filings at the SEC. Given how successful last year was for most investors, it'll be interesting to see how 401(k) plans fared. Something that's got my attention of late is the net buying and selling of company stock and its predictor of future stock performance. For instance, if Talbot employees were net buyers of its company stock within the 401(k) in 2008, what was the likelihood its stock would increase in 2009? I'm not a mathematician but I do know its employees were net buyers of 329,370 shares in 2008 and its stock was up 273% in 2009. For fun, I thought I'd look at other retailers to see if there's a pattern worth noting or if it's mere coincidence. Depending on my findings, you might want to peruse a few of the 2009 11-K filings coming online. They may lead to untold riches or not.
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401(k) Net Stock Purchases and Total Returns

Company


Net Shares Bought/Sold

2008


Total Return

2009


Total Return

2008


Talbots (NYSE:TLB)


329,370


273%


-75.4%


Limited Brands (NYSE:LTD)


206,271


97.6%


-43.8%


Ann Taylor Stores (NYSE:ANN)


25,732


136.4%


-77.4%


Men\'s Wearhouse (NYSE:MW)


174,168


57.6%


-48.8%


Buckle (NYSE:BKE)


134,805


46.1%


11.8%


Urban Outfitters (Nasdaq:URBN)


-249,818


133.6%


-45.0%


Hard to Tell
Last year was a very strong year for retail. The SPDR S&P Retail ETF was up 77.3% in 2009, which makes it very difficult to determine whether any of the stock buying by retail employees in 2008 had anything remotely to do with the performance of those stocks in 2009. It just as easily could have been a case of a rising tide floating all boats. With the exception of Urban Outfitters, all of the retailers in the table above saw net buying of their shares in 2008. A better question might be why Urban Outfitter employees weren't gobbling up their shares in 2008 because with the exception of Buckle, they all saw significant price declines. My best guess is that Urban's 18.4% gain in 2007 (the only one with a positive return) was enough to make employees take some profits off the table. It'll be interesting to see how bullish Urban employees were in 2009. My guess is they were big net buyers. We'll know shortly.

The Difference Maker
While not perfect, if you look at the percentage increase in shares of each of the companies in 2008, it does correlate somewhat with their total returns. For instance, Talbot's had the second highest increase in shares at 66.9%, which resulted in the highest total return of the group at 273%. The largest share increase in 2008 belonged to Buckle and this translated into a total return of 46.1% the following year, which is more than respectable. Five of the six stocks are up year-to-date with Men's Wearhouse the exception. I'll bet you when the 11-K's for 2009 come out in the next few weeks that the likeliest 401(k) to be a net seller last year will be the Houston suit retailer.

The Bottom Line
I've written extensively about share repurchases and the fact that C-Suite's have very little understanding of the true intrinsic value of their company stock. However, I'm not so sure about their employees. More study is needed obviously but it appears very possible that the average person standing around the water cooler has a clearer picture of what's going on at work than the people at the top making the decisions. (For more stock analysis, take a look at Insiders Are Selling, Should You?)

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Tickers in this Article: TLB, LTD, ANN, MW, BKE, URBN

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