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I am still in a learning curve and have been trying to apply principles as I learn them here on The Fool. There was another investment site that listed ESS Technology, (EEST), as a STRONG BUY, so I started to check the financial information, etc. on it. The company makes chips for DVD players and have just announced the development of the smallest digtal camera chip yet for cell phones. Stock price has increased over 100% in the past year with 52 week highs being reached 3 times in the past month. There is no debt. EPS went from .83 share to 1.25 share in the past 3 months. Insider ownership was 19% and Institutional ownership 65%. PE was 36.47. It looked great to me until I checked the insider trading information. Two days after the first 52 week high was reached on Oct. 30, 2003 the Chairman started to dump stock. He make 17 sales in November 2003 totally more than 1 million shares. He dumped stock several times the day before a new high was reached. No other insider sales had been made in more than a year until that point, and the stock until then had also been flat. MY QUESTION: This seems like it could be an indicator of a false rise in stock price due to a sudden high volume of stock entering the market. This sure doesn't look like leadership confidence. Is this a red flag, or am I missing a good stock? Any ideas? I have not seen a current review of ESS on Fool except for a small example of accounting watchflags in September 2003. Also, if anyone would be willing to look and comment on the other financial info that signal problems or potential, I'm listening!
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