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The insiders of Molycorp (MCP) made 26 separate insider sell transactions from February 16, 2011 to June 15, 2011 at $50-$51 price range. Today, the stock is trading at $8.


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With this episode in mind, I decided to screen for stocks which have seen recent intensive insider selling.

Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10 percent.

In this article, I will feature three stocks that met these three criteria of intensive insider selling during the last 30 days.

1. Thermon Group (THR) provides highly engineered thermal solutions, known as heat tracing, for process industries, including energy, chemical processing and power generation. Thermon's products provide an external heat source to pipes, vessels and instruments for the purposes of freeze protection, temperature maintenance, environmental monitoring and surface snow and ice melting.


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Insider sells

  • George Alexander sold 60,000 shares on December 10 - January 8 pursuant to a Rule 10b5-1 Trading Plan. George Alexander currently controls 347,684 shares or 1.1% of the company. George Alexander is Executive Vice President, Global Sales.
  • Jay Peterson sold 20,000 shares on December 20 - January 4 pursuant to a Rule 10b5-1 Trading Plan. Jay Peterson currently controls 93,977 shares or 0.3% of the company. Jay Peterson is Chief Financial Officer, Senior Vice President, Finance, and Secretary.
  • René van der Salm sold 12,500 shares on December 17 pursuant to a Rule 10b5-1 Trading Plan. René van der Salm currently controls 284,567 shares or 0.9% of the company. René van der Salm is Senior Vice President, Global Operations.

Financials

The company reported the second quarter fiscal year 2013, which ended September 30, 2012, financial results on November 8 with the following highlights:

Revenue $67.4 million
Net income $7.0 million
Cash $16.4 million
Debt $118.1 million

Outlook

Backlog at Q2 was $112.9 million an increase of $25.6 million or 29%.

Competition

Thermon's competitors include Pentair (PNR). Here is a table comparing these two companies.

Company THR PNR Industry
Market Cap: 709.32M 10.59B 1.24B
Employees: 755 15,300 3.06K
Qtrly Rev Growth (yoy): -0.01 -0.03 0.12
Revenue: 272.45M 3.53B 1.59B
Gross Margin: 0.49 0.32 0.30
EBITDA: 73.95M 547.79M 159.60M
Operating Margin: 0.22 0.12 0.08
Net Income: 26.77M 28.94M N/A
EPS: 0.84 0.28 0.75
P/E: 27.26 181.77 15.57
PEG (5 yr expected): 1.08 1.33 1.25
P/S: 2.62 2.96 0.87

Thermon is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

The stock has a $17 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. The stock is trading at a P/E ratio of 27.26 and a forward P/E ratio of 18.05. The company has a book value of $6.87 per share. I believe there is an opportunity for a short entry with the $17 target price from the Point and Figure chart. I would place a stop loss at $26, which is the all time high. The three main reasons for the proposed short entry are high P/S ratio, bearish Point and Figure chart and insider selling activity.

2. Nasdaq OMX Group (NDAQ) delivers trading, clearing, exchange technology, regulatory, securities listing, and public company services worldwide.


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Insider sells

  • Bruce Aust sold 25,000 shares on December 18 - January 7 pursuant to a Rule 10b5-1 trading plan adopted on August 7, 2012. Bruce Aust currently holds 121,751 shares or less than 0.1% of the company. Bruce Aust is Executive Vice President, Global Corporate Client Group at Nasdaq OMX.
  • Robert Greifeld sold 1,000,000 shares on December 10-26 pursuant to a Rule 10b5-1 trading plan adopted on November 26, 2012. Robert Greifeld currently holds 673,055 shares or 0.4% of the company. Robert Greifeld is Chief Executive Officer of the company.
  • John Jacobs sold 300,000 shares on December 13 and currently holds 144,505 shares or less than 0.1% of the company. John Jacobs is Chief Marketing Officer and Executive Vice President of the company.

Financials

The company reported the third-quarter financial results on October 24 with the following highlights:

Revenue $603 million
Net income $89 million
Cash $438 million
Debt $1,986 million

Outlook

For the full year of 2012, total core operating expenses are expected to be in the range of $865 million to $873 million (down from prior core expense guidance of $870 to $890 million), plus $32 million to $36 million in incremental new initiative spending, and an additional $25 million to $26 million due to the BWise and NOS acquisitions, resulting in total operating expenses in the range of $922 million to $935 million, down from previous guidance of $935 to $965 million.

Competition

Nasdaq OMX Group's competitors include CME Group (CME) and NYSE Euronext (NYX). Here is a table comparing these companies.

Company NDAQ CME NYX Industry
Market Cap: 4.34B 17.60B 7.88B 15.30M
Employees: 2,503 2,740 3,077 15.00
Qtrly Rev Growth (yoy): -0.21 -0.22 -0.28 0.15
Revenue: 3.21B 2.99B 3.58B 14.86M
Gross Margin: 0.52 0.97 1.00 0.93
EBITDA: 856.00M 1.97B 932.00M -299.18K
Operating Margin: 0.23 0.57 0.21 0.27
Net Income: 347.00M 1.48B 431.00M N/A
EPS: 1.98 4.45 1.69 N/A
P/E: 13.32 11.87 19.20 12.03
PEG (5 yr expected): 1.02 1.64 3.35 1.47
P/S: 1.34 5.90 2.19 7.98

Nasdaq OMX Group is trading slightly above the industry average P/E ratio.

My analysis

The stock has a $15 price target from the Point and Figure chart. There have been 10 insider sell transactions, and there have not been any insider buy transactions during the last 30 days. The stock is trading at a P/E ratio of 13.32 and a forward P/E ratio of 9.42. The company has a book value of $31.08 per share and the stock has a 1.99% dividend yield. I believe there is an opportunity for a short entry with the $15 target price from the Point and Figure chart. I would place a stop loss at $30, which is the two year high. The two main reasons for the proposed short entry are bearish Point and Figure chart and insider selling activity.

3. FirstEnergy (FE) operates as a diversified energy company. The company, through its subsidiaries, engages in the generation, transmission, and distribution of electricity.


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Insider sells

  • Donald Schneider sold 12,599 shares on January 7 pursuant to a rule 10b5-1 trading plan signed on August 23, 2012. Donald Schneider currently holds 11,618 shares or less than 0.1% of the company. Donald Schneider is president of FirstEnergy Solutions, the competitive subsidiary of FirstEnergy.
  • Leila Vespoli sold 11,914 shares on January 3 and currently holds 50,977 shares or less than 0.1% of the company. Leila Vespoli is executive vice president and general counsel of FirstEnergy.
  • James Lash sold 8,501 shares on January 3 and currently holds 42,047 shares or less than 0.1% of the company. James Lash is president, FirstEnergy Generation.
  • Charles Jones sold 8,936 shares on January 3 and currently holds 57,545 shares or less than 0.1% of the company. Charles Jones is president, FirstEnergy Utilities.
  • Mark Clark sold 14,892 shares on January 3 and currently holds 107,166 shares or less than 0.1% of the company. Mark Clark is executive vice president, finance and strategy, for FirstEnergy.
  • Anthony Alexander sold 29,744 shares on January 3 and currently holds 346,726 shares or less than 0.1% of the company. Anthony Alexander is president and chief executive officer of FirstEnergy.

Financials

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

Revenue $4,311 million
Net income $425 million
Cash $150 million
Debt $18,704 million

Outlook

2012 Earnings Guidance

Normalized non-GAAP earnings guidance for 2012, excluding special items, is narrowed from $3.30 - $3.60 per basic share to $3.30 - $3.40 per basic share.

2013 Earnings Guidance

Normalized non-GAAP earnings guidance for 2013, excluding special items, is $2.85 to $3.15 per basic share.

Competition

FirstEnergy's competitors include American Electric Power (AEP), Dominion Resources (D) and Public Service Enterprise (PEG). Here is a table comparing these companies.

Company FE AEP D PEG Industry
Market Cap: 16.82B 20.94B 29.99B 15.23B 2.46B
Employees: 20,000 18,710 15,800 9,784 2.55K
Qtrly Rev Growth (yoy): -0.09 -0.04 -0.09 -0.08 0.06
Revenue: 15.70B 14.78B 13.29B 10.01B 2.54B
Gross Margin: 0.54 0.37 0.33 0.37 0.36
EBITDA: 3.88B 4.69B 4.00B 3.72B 499.00M
Operating Margin: 0.16 0.19 0.19 0.25 0.15
Net Income: 1.02B 1.45B 1.16B 1.41B N/A
EPS: 2.42 3.19 2.03 2.78 0.42
P/E: 16.62 13.54 25.68 10.83 15.98
PEG (5 yr expected): 3.09 4.59 3.32 -9.51 2.67
P/S: 1.10 1.42 2.26 1.54 1.50

FirstEnergy is growing below the industry average growth rate, which could explain some of the insider selling.

My analysis

The stock has a $36 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. The stock is trading at a P/E ratio of 16.62 and a forward P/E ratio of 13.41. The company has a book value of $32.11 per share and the stock has a 5.47% dividend yield. I believe there is an opportunity for a short entry with the $36 target price from the Point and Figure chart. I would place a stop loss at $46, which is the three month high and also above the 200 day moving average. The three main reasons for the proposed short entry are bearish Point and Figure chart, insider selling activity and subdued company outlook.

Source: 3 Stocks With Recent Intensive Insider Selling