In August 2011, Both CEO Frazier and CFO Kellog Bought Significant Stakes At Around $31. . .


One might be tempted to think of the above (click to enlarge) as profiting from an irrationally-pessimistic market scare. That scare, in mid-August, ran NYSE- and NASDAQ-wide.

Even so, it is true that Mr. Frazier bought 32,000 shares, or nearly $1 million worth of Merck common stock in the open market, at around $31. CFO Peter Kellog bought 15,800 shares, or about $500,000 worth at around the same $31 low watermark.

With the scare passing, these look like very opportune buys — and while they reflect confidence in Merck (during a rough patch), financial analysis would reveal that there was very little risk of a catastrophic loss for the two investments.

In fact, each trade is now up about 8 percent (at $33.50), in about 15 days — and that works out to an annualized return of around 196 percent. . . very little risk, for very big returns, that. Just the same, Merck is intrinsically, inexorably north of a $30 stock. And — as the above chart shows — Frazier and Kellog know it.

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