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:
- The stock was sold by three or more insiders within one month.
- The stock was purchased by no insiders in the month of intensive selling.
- At least two sellers decreased their holdings by more than 10 percent.
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 last 30 days.
1. Delphi Automotive (DLPH) is a global supplier of electronics and technologies for automotive, commercial vehicle and other market segments.
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Insider sells
- Gary Cowger sold 8,000 shares on December 3 pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on May 21, 2012. Gary Cowger currently holds 98,679 shares of the company. Gary Cowger has been a director of the company since November 2009.
- Nicholas Donofrio sold 10,250 shares on December 3 pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on May 15, 2012. Nicholas Donofrio currently holds 109,545 shares of the company. Nicholas Donofrio has been a director of the company since December 2009.
- John Krol sold 56,668 shares on December 3 pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 29, 2012. John Krol currently holds 107,968 shares of the company. John Krol has been the Chairman of the Board since 2009.
- Bernd Wiedemann sold 13,000 shares on December 3 pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on May 18, 2012. Bernd Wiedemann currently holds 92,679 shares of the company. Bernd Wiedemann has been a Director of the company since April 2010.
- Michael McNamara sold 20,000 shares on November 20 pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on May 23, 2012. Michael McNamara currently holds 70,679 shares of the company. Michael McNamara has been a Director of the company since November 2009.
- Lawrence Zimmerman sold 32,304 shares on November 15 pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on May 23, 2012. Lawrence Zimmerman currently holds 106,986 shares of the company. Lawrence Zimmerman has been a Director of the company since November 2009.
- Sean Mahoney sold 21,600 shares on November 5 pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on May 29, 2012. Sean Mahoney currently holds 62,534 shares of the company. Sean Mahoney has been a Director of the company since November 2009.
Financials
The company reported the third-quarter financial results on November 1 with the following highlights:
| Revenue | $3.66 billion |
| Net income | $269 million |
| Cash | $1.6 billion |
| Debt | $2.0 billion |
Outlook
The company's outlook for the fourth quarter is as follows:
| Revenue | $3.725 - $3.825 billion |
| Earnings per share | $0.80-$0.90 |
Competition
Delphi Automotive's competitors include Denso Corp. (DNZOY.PK) and Magna International (MGA). Here is a table comparing these companies.
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Delphi Automotive is trading above the industry average P/S ratio.
My analysis
The stock has a $50 price target from the Point and Figure chart. There have been eight insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are 11 analyst buy ratings, two neutral ratings and 0 sell ratings with a average target price of $38.00. The stock is trading at a P/E ratio of 8.89 and a forward P/E ratio of 7.75. The company has a book value of $7.57 per share. I would wait for a bearish signal from the Point and Figure chart before considering a short entry for the stock.
2. Amphenol Corporation (APH) produces electronic and fiber optic connectors, cable and interconnect systems.
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Insider sells
- Diana Reardon sold 101,000 shares on November 29 - December 3 and currently holds 9,000 options. Diana Reardon is Executive Vice President and Chief Financial Officer of the company.
- Edward Wetmore sold 42,000 shares on November 29 and currently holds 3,392 shares of the company. Edward Wetmore is Vice President, Secretary and General Counsel of the company.
- Andrew Lietz sold 7,000 shares on November 26 and currently holds 27,150 shares of the company. Andrew Lietz serves as a director of the company.
- Edward Jepsen sold 40,000 shares on November 20-21 and currently holds 100,000 shares of the company. Edward Jepsen serves as a director of the company.
- Dean Secord sold 8,000 shares on November 12 and currently holds 6,508 shares of the company. Dean Secord serves as a director of the company.
- Richard Schneider sold 29,200 shares on November 6 and currently holds 5,200 shares of the company. Richard Schneider is Senior Vice President of the company.
Financials
The company reported the third-quarter financial results on October 17 with the following highlights:
| Revenue | $1.1 billion |
| Net income | $147.5 million |
| Cash | $892.9 billion |
| Debt | $1.6 billion |
Outlook
The company expects fourth quarter 2012 revenues in the range of $1.095 billion to $1.115 billion and diluted EPS in the range of $0.88 to $0.91. For the full year 2012, the company expects to achieve revenues and diluted EPS in the range of $4.241 billion to $4.261 billion and $3.41 to $3.44, respectively, an increase in revenues of 8% and in diluted EPS (excluding one-time items), of 12% to 13% over 2011. This compares to prior full year 2012 guidance for revenues and diluted EPS in the range of $4.210 billion to $4.250 billion and $3.38 to $3.44, respectively.
Competition
Amphenol Corporation's competitors include Molex Incorporated (MOLX) and TE Connectivity (TEL). Here is a table comparing these companies.
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Amphenol Corporation is trading above the industry average P/S ratio.
My analysis
The stock has a bearish $52 price target from the Point and Figure chart. There have been seven insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are four analyst buy ratings, three neutral ratings and one sell rating with a average target price of $55.57. The stock is trading at a P/E ratio of 18.96 and a forward P/E ratio of 16.13. The company has a book value of $14.98 per share and the stock has a 0.69% dividend yield. There is an opportunity for a short entry with the $52 price target from the Point and Figure chart. I would place a stop loss above the 52 -week highs around $65.
3. G&K Services (GKSR) provides branded uniform and facility services programs in the United States, Canada, Ireland, and the Dominican Republic.
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Insider sells
- Jeffrey Wright sold 11,078 shares on December 5 and currently holds 61,289 shares of the company. Jeffrey Wright is Executive Vice President, Chief Financial Officer and Director of the company.
- Thomas Dietz sold 2,215 shares on December 4 and currently holds 10,382 shares of the company. Thomas Dietz is Vice President and Controller.
- Alice Richter sold 4,700 shares on November 14-16 and currently holds 5,993 shares of the company. Ms. Richter is a director of the company, and serves as Chair, and as the Financial Expert, of the company's Audit Committee.
Financials
The company reported the first quarter fiscal 2013, which ended September 29, financial results on October 30 with the following highlights:
| Revenue | $222.4 million |
| Net income | $11.9 million |
| Cash | $20.2 million |
| Debt | $205.7 million |
Outlook
The company expects to drive continued performance gains in fiscal 2013, despite persistent weakness in the economy, slow employment growth and considerable political uncertainty. The company continues to expect fiscal 2013 revenue in a range of $890 million to $910 million. Based on first quarter performance, the company raised its full-year earnings guidance to a range of $2.25 to $2.45 per diluted share, up from the previously announced range of $2.20 to $2.40.
My analysis
The stock has a $49 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 is one analyst buy rating, two neutral ratings and 0 sell ratings with a average target price of $37.00. The stock is trading at a P/E ratio of 23.06 and a forward P/E ratio of 12.37. The company has a book value of $21.83 per share and the stock has a 2.30% dividend yield. I would wait for a bearish signal from the Point and Figure chart before considering a short entry for the stock.
4. Henry Schein (HSIC) distributes healthcare products and services primarily to office-based healthcare practitioners.
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Insider sells
- Norman Matthews sold 15,000 shares on December 5 and currently holds 29,547 shares of the company. Mr. Matthews has been a director of the company since February 2002.
- Stanley Komaroff sold 49,705 shares on December 4 and currently holds 69,260 shares of the company. Mr. Komaroff joined Henry Schein in December 2003 as Senior Advisor and a member of the company's Executive Management Committee, concentrating in business development and acquisitions, international matters, and legal and regulatory affairs.
- Donald Kabat sold 15,000 shares on December 4 and currently holds 13,896 shares of the company. Mr. Kabat has been a director of the company since May 1996.
Financials
The company reported the third-quarter financial results on November 7 with the following highlights:
| Revenue | $2.23 billion |
| Net income | $96.8 million |
| Cash | $89.3 million |
| Debt | $609.3 million |
Outlook
- For 2012 the company expects diluted EPS attributable to Henry Schein to be $4.35 to $4.40, which represents growth of 10% to 11% compared with 2011 results and compares with previous guidance of $4.30 to $4.40.
- For 2013 the company expects diluted EPS attributable to Henry Schein to be $4.81 to $4.91, which represents growth of approximately 10% to 12% compared with the midpoint of the 2012 guidance range.
Competition
Henry Schein's competitors include McKesson Corporation (MCK) and Patterson Companies (PDCO). Here is a table comparing these companies.
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Henry Schein is trading above the industry average P/S ratio.
My analysis
The stock has a $95 price target from the Point and Figure chart. There have been three insider sell transactions and there have not been any insider buy transactions during the last 30 days. There is one analyst buy rating, 10 neutral ratings and 1 sell rating with a average target price of $73.22. The stock is trading at a P/E ratio of 18.85 and a forward P/E ratio of 16.54. The company has a book value of $29.13 per share. I would wait for a bearish signal from the Point and Figure chart before considering a short entry for the stock.
5. On Assignment (ASGN), a diversified professional staffing firm, provides flexible and permanent staffing solutions in the United States, Europe, Canada, Australia, and New Zealand.
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Insider sells
- William Brock sold 15,000 shares on December 4 and currently holds 34,176 shares of the company. William Brock serves as a director of the company.
- James Brill sold 25,000 shares on December 4 and currently holds 209,491 shares of the company. James Brill joined On Assignment as Senior Vice President, Finance and Chief Financial Officer in January 2007.
- Jeremy Jones sold 25,000 shares on December 3 and currently holds 91,662 shares of the company. Jeremy Jones serves as a director of the company.
- Jonathan Holman sold 2,000 shares on December 3 and currently holds 26,680 shares of the company. Jonathan Holman serves as a director of the company.
- Michael McGowan sold 25,000 shares on December 3 and currently holds 302,886 shares of the company. Michael McGowan has served as President of Oxford Global Resources since 1998 and was promoted to Chief Operating Officer of On Assignment in 2012.
Financials
The company reported the third-quarter financial results on October 25 with the following highlights:
| Revenue | $388.3 million |
| Net income | $17.4 million |
| Cash | $13.9 million |
| Debt | $439.1 million |
Outlook
Based on revenues for the first three weeks of the fourth quarter, On Assignment provided financial estimates for the quarter ending December 31, 2012, which do not include any acquisition-related or offering costs. Those estimates follow:
- Revenues of $385 million to $389 million
- Gross Margin of 30.1 percent to 30.4 percent
- SG&A of $86 to $87 million, which includes $1.8 million in depreciation, $3.5 million amortization and $2.9 million in equity-based compensation expense
- Adjusted EBITDA of $37.1 million to $40.8 million
- Effective tax rate of 42 percent
- Net income of $13.3 million to $15.4 million
- Earnings per diluted share of $0.25 to $0.29
- Diluted shares outstanding of 53.3 million
Competition
On Assignment's competitors include AMN Healthcare Services (AHS) and Cross Country Healthcare (CCRN). Here is a table comparing these companies.
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On Assignment is trading above the industry average P/S ratio.
My analysis
The stock has a $30.5 price target from the Point and Figure chart. There have been five insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are eight analyst buy ratings, 0 neutral ratings and 0 sell ratings with a average target price of $21.50. The stock is trading at a P/E ratio of 23.02 and a forward P/E ratio of 16.04. The company has a book value of $9.83 per share. I would wait for a bearish signal from the Point and Figure chart before considering a short entry for the stock.
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in APH over the next 72 hours.
