3 Stocks With Recent Intensive Insider Selling

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 |  Includes: BLOX, GHDX, NTAP
by: Markus Aarnio

The insiders of Herbalife (NYSE:HLF) made 10 separate insider sell transactions from March 1, 2012 to May 1, 2012 at $66-$70 price range. The stock is currently trading at $40 and was at $24 just three weeks ago.

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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 in the last 30 days.

1. Genomic Health (NASDAQ:GHDX) is a global healthcare company that provides actionable genomic information to personalize cancer treatment decisions.

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Insider sells

  • Dean Schorno sold 5,625 shares on December 11, 2012 - January 9, 2013 pursuant to Rule 10b5-1 sales plan adopted on August 13, 2012. Dean Schorno currently holds 17,355 shares or less than 0.1% of the company. Dean Schorno is Chief Financial Officer of the company.
  • Bradley Cole sold 2,500 shares on January 9 pursuant to Rule 10b5-1 sales plan adopted on August 20, 2012. Bradley Cole currently holds 14,085 shares or less than 0.1% of the company. Bradley Cole is Chief Operating Officer of the company.
  • Steven Shak sold 5,000 shares on December 18 pursuant to Rule 10b5-1 sales plan adopted on June 8, 2012. Steven Shak currently holds 333,768 shares or 1.1% of the company. Steven Shak is Chief Medical Officer, and Executive Vice President of Research & Development.
  • Kimberly Popovits sold 5,000 shares on December 18 pursuant to Rule 10b5-1 sales plan adopted on November 11, 2011. Kimberly Popovits currently controls 254,997 shares or 0.8% of the company. Kimberly Popovits is Chairman of the Board, Chief Executive Officer & President of the company.

Financials

The company reported the third-quarter financial results on November 7 with the following highlights:

Revenue $58.6 million
Net income $3.7 million
Cash $127.0 million
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Competition

Genomic Health's main competitor is Hologic (NASDAQ:HOLX). Here is a table comparing these two companies.

Company GHDX HOLX Industry
Market Cap: 893.87M 5.96B 105.82M
Employees: 511 6,157 491.00
Qtrly Rev Growth (yoy): 0.13 0.26 0.30
Revenue: 228.14M 2.00B 46.77M
Gross Margin: 0.84 0.63 0.53
EBITDA: 13.33M 668.12M -15.71K
Operating Margin: 0.03 0.16 0.04
Net Income: 8.85M -73.63M N/A
EPS: 0.29 -0.28 N/A
P/E: 100.59 N/A 18.35
PEG (5 yr expected): 4.80 1.12 1.21
P/S: 3.99 3.02 2.69
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Genomic Health is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

The stock has a $22 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. The stock is trading at a P/E ratio of 100.59 and a forward P/E ratio of 103.82. The company has a book value of $4.77 per share. I believe there is an opportunity for a short entry with the $22 target price from the Point and Figure chart. I would place a stop loss at $37, 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 the intensive insider selling activity.

2. NetApp (NASDAQ:NTAP) engages in design, manufacture, marketing, and technical support of networked storage solutions.

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Insider sells

  • Daniel Warmenhoven sold 89,353 shares on December 20, 2012 - January 3, 2012 pursuant to a Rule 10b5-1 trading plan. Daniel Warmenhoven currently controls 2,587,924 shares or 0.7% of the company. Daniel Warmenhoven is executive chairman of the Board of Directors.
  • Robert Wall sold 27,000 shares on December 20, 2012 and currently holds 110,571 shares or less than 0.1% of the company. Robert Wall serves as a director of the company.
  • Thomas Georgens sold 115,625 shares on December 19, 2012 and currently controls 74,054 shares or less than 0.1% of the company. Thomas Georgens is president and chief executive officer and a member of the Board of Directors of NetApp.

Financials

The company reported the second quarter of fiscal year 2013, which ended October 26, 2012, financial results on November 14 with the following highlights:

Revenue $1.541 billion
Net income $109.6 million
Cash $5.571 billion
Debt $1.229 billion
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Outlook

NetApp's outlook for the third quarter of fiscal year 2013 is as follows:

  • NetApp estimates revenue to be in the range of $1.575 billion to $1.675 billion.
  • NetApp estimates GAAP earnings per share to be approximately $0.29 to $0.34 per share.
  • NetApp estimates that the share count will decrease to approximately 365 million shares.

Competition

NetApp's competitors include EMC Corporation (EMC) and Hewlett-Packard (NYSE:HPQ). Here is a table comparing these companies.

Company NTAP EMC HPQ Industry
Market Cap: 11.84B 50.88B 31.48B 171.88M
Employees: 12,149 53,600 331,800 1.82K
Qtrly Rev Growth (yoy): 0.02 0.06 -0.07 0.19
Revenue: 6.25B 21.26B 120.36B 451.97M
Gross Margin: 0.59 0.62 0.23 0.25
EBITDA: 815.00M 5.06B 14.66B 8.35M
Operating Margin: 0.10 0.19 0.08 -0.05
Net Income: 473.70M 2.69B -12.65B N/A
EPS: 1.27 1.22 -6.41 N/A
P/E: 25.95 19.80 N/A 16.03
PEG (5 yr expected): 1.41 1.01 N/A 0.59
P/S: 1.86 2.36 0.26 0.80
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NetApp 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 four 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 25.95 and a forward P/E ratio of 15.45. The company has a book value of $12.29 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 $37, which is the four month high and also above the 200 day moving average. The three main reasons for the proposed short entry are high P/S ratio, bearish Point and Figure chart and the intensive insider selling activity.

3. Infoblox (NYSE:BLOX) develops, markets, and sells automated network control solutions worldwide.

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Insider sells

  • Sohail Parekh sold 15,362 shares on January 4-9 pursuant to a Rule 10b5-1 trading plan adopted on July 9, 2012. Sohail Parekh currently holds 0 shares of the company. Sohail Parekh is Executive Vice President, Engineering.
  • David Gee sold 581 shares on January 4 pursuant to a Rule 10b5-1 trading plan adopted on October 4, 2012. David Gee currently holds 0 shares of the company. David Gee is Executive Vice President of Marketing.
  • Remo Canessa sold 50,000 shares on January 3-4 and currently holds 327,812 shares or 0.7% of the company. Remo Canessa is Chief Financial Officer of the company.

Financials

The company reported the first quarter fiscal year 2013, which ended October 31, 2012, financial results on November 28 with the following highlights:

Revenue $49.5 million
Net loss $2.4 million
Cash $168.2 million
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Outlook

For the second fiscal quarter ending January 31, 2013, the company currently expects:

  • Total net revenue in the range of $50 million to $51.5 million;
  • Non-GAAP gross margin to be approximately 78%;
  • Non-GAAP operating margin in the range of 4% to 5%; and
  • Non-GAAP diluted net income per share to be in the range of $0.03 to $0.04, assuming approximately 53 million shares on a non-GAAP diluted weighted average basis.

For the fiscal year ending July 31, 2013, the company currently expects:

  • Total net revenue in the range of $204 million to $208 million;
  • Non-GAAP operating margin in the range of 5% to 6%; and
  • Non-GAAP EPS to be in the range of $0.17 to $0.21, assuming approximately 54.5 million shares on a non-GAAP diluted weighted average basis.

Competition

Infoblox's competitors include Alcatel-Lucent (ALU), Hewlett-Packard and International Business Machines (NYSE:IBM). Here is a table comparing these companies.

Company BLOX ALU HPQ IBM Industry
Market Cap: 907.66M 3.65B 31.48B 219.72B 281.84M
Employees: 520 76,002 331,800 440,885 899.00
Qtrly Rev Growth (yoy): 0.26 -0.03 -0.07 -0.05 0.15
Revenue: 179.40M 18.77B 120.36B 104.69B 188.54M
Gross Margin: 0.78 0.31 0.23 0.48 0.38
EBITDA: -1.87M 907.58M 14.66B 26.51B 22.50M
Operating Margin: -0.04 0.00 0.08 0.21 0.07
Net Income: -8.83M -192.91M -12.65B 16.26B N/A
EPS: -0.30 0.49 -6.41 13.91 0.13
P/E: N/A 3.26 N/A 13.98 23.17
PEG (5 yr expected): N/A 0.34 N/A 1.32 1.17
P/S: 4.97 0.20 0.26 2.08 1.75
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Infoblox is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

The stock has a $3 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. The stock is trading at a forward P/E ratio of 51.89. The company has a book value of $3.15 per share. I believe there is an opportunity for a short entry with the $3 target price from the Point and Figure chart. I would place a stop loss at $24, 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 the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in BLOX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.