Micro-Cap Corner

Last week, we took a look at a building consensus of insider accumulation in the tower stocks. Though late to the party, executives at Pinnacle Holdings Inc. (NasdaqNM: BIGT) have hit the scene with a real vengeance. In the four-day period August 20 through August 24, five insiders, led by Director Arthur Hill, picked up a combined 328,000 shares on the open market at $0.77 to $1.02 per share.

Like other tower operators, Pinnacle has been absolutely decimated over the past eighteen-or-so months. Interestingly, insiders, including VP, Sales Ben Gaboury, one of the recent buyers, appeared to call a short-term bottom with a round of accumulation last November. The stock went on to rally some 80% in the ensuing months; however, it hit a wall in February and has fallen steadily since.

Keep in mind, these trades occurred before the events of September 11 and Pinnacle Holdings did operate a facility on the World Trade Centers; though the impact is not yet clear. The fact remains that the insider consensus that has developed in the group is striking. For investors with an interest in micro caps, Pinnacle might be worth remembering when the dust settles.

If wireless escapes unscathed, commercial air carriers will undoubtedly suffer in the wake of the September 11 attacks, as likely will industry suppliers. That investors consider BE Aerospace (NasdaqNM: BEAV), a manufacturer of cabin interiors, at risk is clear. Almost immediately when the markets reopened, the shares plunged nearly 70%.

The good news? They’re hardly infallible on such things, and it may be small consolation, but analysts insist that BE Aerospace has enough cash reserves to meet obligations, even assuming the worst. As a result, some suggest that, while earnings will invariably take a hit, the dramatic sell-off is something of an overreaction. Insiders may agree.

Almost immediately (September 17 through September 20), six executives hit the open market to purchase a combined 238,000 BE Aerospace shares at prices ranging from $4.18 to $6.92 per share. Among the buyers, Chairman Amin Khoury picked up 50,000 shares, while President, Chief Executive Robert Khoury and CFO Thomas McCaffrey picked up 20,000 shares and 18,000 shares, respectively.

To be sure, these insiders could have reacted more in a show of faith than of investment acumen. At the same time, BE Aerospace insiders, including a number of the recent buyers, accumulated the stock in late 1999 and early 2000 ahead of an impressive second-half 2000 run-up. No less impressive, many of these same executives sold quite near the top in 1997.

There’s little doubt there are rough skies ahead. But it won’t be the first time. BE Aerospace has had its up and downs over the years. Insiders have typically been on the right side of the call.

COPYRIGHT 2001 American Banker-Bond Buyer

COPYRIGHT 2001 Gale Group