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A study (pdf) titled "Predictive and Statistical Properties of Insider Trading" by James H. Lorie and Victor Niederhoffer reached the following conclusion:

Insiders tend to sell more than usual before price decreases.

In the study intensive insider selling was defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was purchased by no insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10 per cent.

The stocks meeting these three criteria underperformed the market during the next six months period following "intensive" insider selling.

In this article I will feature five stocks that met these three criteria of intensive insider selling during the month of November.

1. Generac (GNRC) has been a leading designer and manufacturer of a wide range of generators and other engine powered products since 1959. As a leader in power equipment serving residential, light commercial, industrial and construction markets, Generac's power products are available through a broad network of independent dealers, retailers, wholesalers and equipment rental companies. The company markets and distributes its products primarily under its Generac and Magnum brand names.

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Insider sells

  • Edward Leblanc sold 4,000 shares on November 28 and currently holds 16,009 shares of the company. Edward LeBlanc has served as a director of Generac since December 2006.
  • Dawn Tabat sold 74,623 shares on November 5-20 pursuant to the terms of a trading plan, adopted March 14, 2012, under Rule 10b5-1. Dawn Tabat currently holds 881,287 shares of the company. Dawn Tabat has served as the company's Chief Operating Officer since 2002.
  • Aaron Jagdfeld sold 5,340 shares on November 16 pursuant to the terms of a trading plan, adopted March 14, 2012, under Rule 10b5-1. Aaron Jagdfeld currently holds 673,365 shares of the company. Aaron Jagdfeld has served as the company's Chief Executive Officer since September 30, 2008 and as a director since November 2006.
  • Roger Schaus sold 37,776 shares on November 5-7 and currently holds 37,982 shares of the company. Roger Schaus serves as the company's Senior Vice President of Service Operations.

Financials

The company reported the third-quarter financial results on October 31 with the following highlights:

Revenue$300.6 million
Net income$25.5 million
Cash$58.0 million
Debt$873.9 million

Outlook

As a result of the current major power outage activity, the company raised its sales growth guidance for full-year 2012 to the low-40% range over the prior year, which represents an increase from the low-30% growth rate previously expected in the October 1st business update. As a result, Adjusted EBITDA for the full-year 2012 is expected to increase in the mid-40% range over the prior year, which is an increase from the mid-30% growth rate previously expected. Diluted net income per common share for 2012 is expected to be in the range of $1.21 to $1.27, with adjusted diluted net income per common share of $2.95 to $3.00, compared to the $2.65 to $2.70 per share range previously expected.

My analysis

The stock has met its $33.5 price target from the Point and Figure chart. There have been six insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are four analyst buy ratings, five neutral ratings and one sell rating with a average target price of $30.40. The stock is trading at a P/E ratio of 6.73 and a forward P/E ratio of 11.10. The company has a book value of $6.36 per share. The stock could be a good short candidate with a stop loss at $40 and a take profit target at the 200 day moving average which is currently at $22.40.

2. Visa (V) is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable digital currency. Underpinning digital currency is one of the world's most advanced processing networks - VisaNet - that is capable of handling more than 20,000 transaction messages a second, with fraud protection for consumers and guaranteed payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, ahead of time with prepaid or later with credit products.

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Insider sells

  • Antonio Lucio sold 15,000 shares on November 29 and currently holds 40,534 shares of the company. Antonio Lucio is Global Chief Marketing Officer and Global Head of Human Resources for Visa.
  • Mary Cranston sold 2,000 shares on November 28 by The Mary B. Cranston Trust 5/12/2009. Mary Cranston currently holds directly 3,091 shares and 5,205 shares by The Mary B. Cranston Trust 5/12/2009. Mary Cranston serves as a director of the company.
  • Elizabeth Buse sold 1,686 shares on November 6 and currently holds 19,510 shares of the company. Elizabeth Buse is the group president, APCEMEA for Visa.
  • William Sheedy sold 10,000 shares on November 6 and currently holds 57,284 shares of the company. William Sheedy serves as group president for the Americas.

Financials

The company reported the full fiscal year 2012, which ended September 30, financial results on October 31 with the following highlights:

Revenue$10.4 billion
Net income$2.1 billion
Cash$10.5 billion

Outlook

Visa provided its financial outlook for the following metrics for fiscal 2013:

  • Annual net revenue growth in the low double digits;
  • Client incentives as a percent of gross revenues: 18% to 18.5% range;
  • Marketing expenses: Under $1 billion;
  • Adjusted annual operating margin of about 60%;
  • Tax rate: 30% to 32% range;
  • Adjusted annual diluted class A common stock earnings per share growth: High teens;
  • Capital expenditures: $425 million to $475 million range; and
  • Annual free cash flow about $5 billion.

Competition

Visa's competitors include American Express Company (AXP), Discover Financial Services (DFS) and Mastercard Incorporated (MA). Here is a table comparing these companies.

CompanyVAXPDFSMAIndustry
Market Cap:100.17B62.56B21.00B60.72B271.75M
Employees:8,50062,50011,6506,700907.00
Qtrly Rev Growth (yoy):0.150.010.090.060.16
Revenue:10.42B29.42B6.64B7.22B189.65M
Gross Margin:0.960.771.001.000.37
EBITDA:6.57BN/AN/A4.06B23.37M
Operating Margin:0.600.240.570.530.07
Net Income:2.14B4.98B2.28B2.17BN/A
EPS:3.154.324.3417.080.14
P/E:47.5012.959.6028.6122.01
PEG (5 yr expected):1.031.150.871.181.10
P/S:9.512.133.168.361.69

Visa is trading above the industry average P/S ratio.

My analysis

The stock has a $156 price target from the Point and Figure chart. There have been four insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are nine analyst buy ratings, four neutral ratings and two sell ratings with a average target price of $129.36. The stock is trading at a P/E ratio of 80.06 and a forward P/E ratio of 17.95. The company has a book value of $34.06 per share and the stock has a 0.88% dividend yield. The stock is making new all time highs. The stock could be a good short candidate after the $156 price target is hit.

3. Salesforce.com (CRM) is the enterprise cloud computing company that is leading customers in their transformation to become social enterprises. Social enterprises are able to connect with customers, partners and employees in entirely new ways. Based on salesforce.com's real-time, multi-tenant architecture, the company's platform and application services give customers the tools to create a true social front office and revolutionize the way they sell, service, market, collaborate, work, and innovate.

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Insider sells

  • Craig Ramsey's wife sold 100,000 shares on November 27-30. Craig Ramsey currently holds 345,516 shares and Craig Ramsey's wife holds 211,122 shares of the company. Craig Ramsey joined salesforce.com's board of directors in April 2003.
  • Shirley Young sold 7,500 shares on November 29 and currently holds 19,800 shares of the company. Shirley Young serves as a director of the company.
  • Stratton Sclavos sold 800 shares on November 27 and currently holds 3,200 shares of the company. Stratton Sclavos serves as a director of the company.
  • Alan Hassenfeld sold 18,750 shares on November 27 and currently holds 25,800 shares of the company. Alan Hassenfeld serves as a director of the company.
  • Parker Harris sold 976 shares on November 23-26 and currently holds 10,476 shares of the company. Parker Harris founded salesforce.com along with Marc Benioff, Dave Moellenhoff and Frank Dominguez in the spring of 1999. As executive vice president, Harris oversees the development of all software for salesforce.com.
  • Hilarie Koplow sold 8,027 shares on November 5-26 pursuant to a 10b5-1 Plan. Hilarie Koplow currently holds 23,288 shares of the company. Hilarie Koplow leads salesforce.com's worldwide sales teams, focusing on growing the company's business globally.
  • George Hu sold 1,390 shares on November 23-26 and currently holds 4,012 shares of the company. George Hu is Chief Operating Officer of the company.
  • Frank van Veenendaal sold 2,008 shares on November 23-26 and currently holds 5,097 shares of the company. As vice chairman of salesforce.com, van Veenedaal leads the global sales, customer support, and consulting services organizations.
  • Graham Smith sold 6,928 shares on November 15-26 and currently holds 19,364 shares of the company. Graham Smith is Executive Vice President and Chief Financial Officer of the company.
  • Burke Norton sold 4,945 shares on November 26 and currently holds 6,305 shares of the company. Burke Norton is Executive Vice President and Chief Legal Officer of the company.
  • Craig Conway sold 500 shares on November 1 pursuant to a 10b5-1 Plan. Craig Conway currently holds 6,164 shares of the company and serves as a director of the company.

Financials

The company reported the third quarter fiscal year 2013, which ended October 31, financial results on November 20 with the following highlights:

Revenue$788.4 million
Net loss$220.3 million
Cash$1.4 billion

The company recorded a one-time, non-cash charge to income tax expense in the third quarter of fiscal 2013 in the amount of $149 million to establish a valuation allowance against a significant portion of its deferred tax assets.

Outlook

  • Q4 FY13 Guidance: Revenue for the company's fourth fiscal quarter is projected to be in the range of $825 million to $830 million, an increase of 31% year-over-year. GAAP net loss per share is expected to be in the range of ($0.25) to ($0.23), while diluted non-GAAP EPS is expected to be in the range of $0.38 to $0.40.
  • Full Year FY13 Guidance: Revenue for the company's full fiscal year 2013 is projected to be in the range of $3.041 billion to $3.046 billion, an increase of 34% year-over-year. For the company's full fiscal year 2013, GAAP net loss per share is expected to be in the range of ($2.02) to ($2.00) while diluted non-GAAP EPS is expected to be in the range of $1.50 to $1.52.
  • Full Year FY14 Guidance: Revenue for the company's full fiscal year 2014 is projected to be in the range of approximately $3.80 billion to approximately $3.85 billion. The company will provide its expectations for FY14 GAAP and non-GAAP EPS when it announces its fourth quarter fiscal year 2013 results in February 2013.

Competition

Salesforce.com's competitors include Oracle Corporation (ORCL) and SAP AG (SAP). Here is a table comparing these companies.

CompanyCRMORCLSAPIndustry
Market Cap:22.39B155.05B92.99B256.20M
Employees:7,785115,00061,344408.00
Qtrly Rev Growth (yoy):0.35-0.020.160.23
Revenue:2.85B36.93B20.33B100.34M
Gross Margin:0.780.790.710.71
EBITDA:88.72M16.96B7.04B5.34M
Operating Margin:-0.030.380.290.03
Net Income:-253.68M10.18B3.78BN/A
EPS:-1.822.013.18N/A
P/E:N/A15.9824.5623.16
PEG (5 yr expected):3.820.991.671.14
P/S:7.924.164.603.10

Salesforce.com is trading above the industry average P/S ratio.

My analysis

The stock has a $202 price target from the Point and Figure chart. There have been 15 insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are 28 analyst buy ratings, three neutral ratings and two sell ratings with a average target price of $176.80. The stock is currently trading at a forward P/E ratio of 80.44. The stock could be a good short candidate after the $202 price target is hit.

4. The Federal Agricultural Mortgage Corporation (AGM), commonly known as Farmer Mac, was created by Congress to establish a secondary market for agricultural mortgage and rural utilities loans to increase the availability of long-term credit at stable interest rates to segments of rural America. As a stockholder-owned, publicly-traded corporation, Farmer Mac, along with its subsidiary Farmer Mac II, LLC., conducts these activities through three programs: Farmer Mac I, Farmer Mac II and Rural Utilities. Farmer Mac is not a direct lender, instead working with lenders that work directly with borrowers throughout the United States.

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Insider sells

  • Tom Stenson sold 62,784 shares on November 13-29 and currently holds 31,027 shares of the company. Mr. Stenson was appointed Chief Operating Officer on June 7, 2007.
  • Myles Watts sold 1,200 shares on November 21 and currently holds 6,958 shares of the company. Myles Watts serves as a director of the company.
  • Sara Faivre-Davis sold 1,200 shares on November 14-19 and currently holds 6,958 shares of the company. Sara Faivre-Davis serves as a director of the company.
  • Dennis Brack sold 4,100 shares on November 19 and currently holds 11,834 shares of the company. Dennis Brack serves as a director of the company.
  • Stephen Mullery sold 2,000 shares on November 19 and currently holds 245 shares of the company. Mr. Mullery was appointed Senior Vice President, General Counsel and Secretary on June 8, 2012.
  • Jerome Oslick sold 27,258 shares on November 12-19 and currently holds 12,300 shares of the company. Jerome Oslick is a former Executive Officer of the company.
  • John Raines sold 3,719 shares on November 15 and currently holds 2,909 shares of the company. John Raines serves as a director of the company.
  • Michael Gerber sold 7,710 shares on November 13 and currently holds 26,002 shares of the company. Michael Gerber is a former Executive Officer of the company.
  • Brian O'Keane sold 1,750 shares on November 13 and currently holds 266 shares of the company. Brian O'Keane is a former director of the company.
  • Lowell Junkins sold 6,300 shares on November 14 and currently holds 9,455 shares of the company. Lowell Junkins serves as a director of the company.

Financials

The company reported the third-quarter financial results on November 8 with the following highlights:

Core earnings$13.4 million
Book value$34.15 per share

My analysis

The stock has a $46.5 price target from the Point and Figure chart. There have been 16 insider sell transactions and there have not been any insider buy transactions during the last 30 days. There is one analyst buy rating, 0 neutral ratings and 0 sell ratings with a average target price of $41.00. The stock is currently trading at a P/E ratio of 7.87 and a forward P/E ratio of 8.00. The stock could be a good short candidate after the $46.5 price target is hit.

5. Trimble (TRMB) applies technology to make field and mobile workers in businesses and government significantly more productive. Solutions are focused on applications requiring position or location including surveying, construction, agriculture, fleet and asset management, public safety and mapping. In addition to utilizing positioning technologies, such as GPS, lasers and optics, Trimble solutions may include software content specific to the needs of the user. Wireless technologies are utilized to deliver the solution to the user and to ensure a tight coupling of the field and the back office.

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Insider sells

  • Mark Harrington sold 60,423 shares on November 6-29 pursuant to a Rule 10b5-1 plan adopted by the reporting person on July 9, 2012. Mark Harrington currently holds 16,605 employee stock options. Mark Harrington joined Trimble in January 2004 as a vice president, primarily responsible for strategy and business development.
  • Rajat Bahri sold 69,667 shares on November 28-30 pursuant to a Rule 10b5-1 plan adopted by the reporting person on August 29, 2012. Rajat Bahri currently holds 16,333 employee stock options. Rajat Bahri joined Trimble as chief financial officer in January 2005.
  • Bradford Parkinson sold 16,250 shares on November 28 and does not currently own any shares. Bradford Parkinson has served as a director of the company since 1984.
  • Steven Berglund sold 105,000 shares on November 8-29 and currently holds 10,664 shares of the company. Steven Berglund has served as president and chief executive officer of Trimble since March 1999.
  • Chris Gibson sold 29,932 shares on November 21 and currently holds 2,772 shares of the company. Chris Gibson was appointed to serve as vice president, responsible for the survey business, and executive committee member in April of 2009.
  • James Kirkland sold 10,100 shares on November 13-19 and currently holds 2,923 shares of the company. James Kirkland joined Trimble as vice president and general counsel in July 2008.
  • Jürgen Kliem sold 87,999 shares on November 16 and currently holds 3,135 shares of the company. Jürgen Kliem was appointed vice president of strategy and business development in October 2008.
  • Bryn Fosburgh sold 42,557 shares on November 12 and currently holds 72,584 employee stock options. Bryn Fosburgh is Vice President and Executive Committee Member.

Financials

The company reported the third-quarter financial results on November 1 with the following highlights:

Revenue$504.8 million
Net income$53.4 million
Cash$141.8 million
Debt$553.2 million

Outlook

For the fourth quarter of 2012 Trimble expects revenue between $503 million and $508 million with GAAP earnings per share of $0.24 to $0.26 and non-GAAP earnings per share of $0.54 to $0.56.

Competition

Trimble's competitors include Garmin (GRMN). Here is a table comparing these two companies.

CompanyTRMBGRMNIndustry
Market Cap:7.02B7.58B88.35M
Employees:5,3019,229560.00
Qtrly Rev Growth (yoy):0.210.010.08
Revenue:1.96B2.86B138.44M
Gross Margin:0.520.520.43
EBITDA:364.00M730.62M8.73M
Operating Margin:0.110.220.06
Net Income:187.28M578.66MN/A
EPS:1.472.960.25
P/E:37.8013.1420.13
PEG (5 yr expected):1.152.421.32
P/S:3.592.651.40

Trimble is trading above the industry average P/S ratio.

My analysis

The stock has a $78 price target from the Point and Figure chart. There have been 12 insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are five analyst buy ratings, two neutral ratings and 0 sell ratings with a average target price of $55.00. The stock is currently trading at a P/E ratio of 38.11 and a forward P/E ratio of 18.01. The company has a book value of $14.34 per share. The stock could be a good short candidate after the $78 price target is hit.

Source: 5 Stocks With Intensive Insider Selling In November