Seeking Alpha
Long/short equity, insider ownership
Profile| Send Message| ()  

The insiders of Family Dollar Stores (FDO) made eight separate insider sell transactions on October 8, 2012 - November 2, 2012 at $65.57 - $68.80 price range. Family Dollar Stores reported the first quarter fiscal 2013, which ended November 24, 2012, financial results on January 3, 2013 with lower than anticipated sales. The stock tanked from $64 to $56 on January 3, 2013.

(click to enlarge)

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. IHS Inc. (IHS) provides critical information and insight products and services. It offers its products and services in various areas, including energy and power; design and supply chain; defense, risk, and security; environment, health, and safety [EHS], and sustainability; country and industry forecasting; and commodities, pricing, and cost.

(click to enlarge)

Insider sells

  • Daniel Yergin sold 19,232 shares on January 10-17 and currently holds 153,298 shares or 0.2% of the company. Daniel Yergin is IHS Vice Chairman.
  • Brian Sweeney sold 1,955 shares on January 17 pursuant to a Rule 10b5-1 trading plan. Brian Sweeney currently holds 4,000 shares or less than 0.1% of the company. Brian Sweeney was named Senior Vice President of Global Sales in October 2011.
  • Heather Matzke-Hamlin sold 3,361 shares on January 17 pursuant to a Rule 10b5-1 trading plan. Heather Matzke-Hamlin currently holds 13,274 shares or less than 0.1% of the company. Heather Matzke-Hamlin has served as Senior Vice President and Chief Accounting Officer since February 2005.
  • Scott Key sold 5,000 shares on January 15 pursuant to a Rule 10b5-1 trading plan. Scott Key currently holds 76,230 shares or 0.1% of the company. Scott Key has served as President and Chief Operating Officer of IHS since January 2011.

Financials

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

Revenue$1.53 billion
Net income$158 million
Cash$345 million
Debt$1.061 billion

Outlook

For the year ending November 30, 2013, IHS expects:

  • All-in revenue in a range of $1.640 billion to $1.710 billion, including an overall organic growth rate expected to be between 5-7 percent at the midpoint;
  • All-in adjusted EBITDA in a range of $540 million to $582 million; and
  • Adjusted EPS between $4.23 and $4.43 per diluted share.

Competition

IHS's competitors include Thomson Reuters (TRI). Here is a table comparing these two companies.

CompanyIHSTRIIndustry
Market Cap:6.52B24.89B2.84B
Employees:6,00060,0005.10K
Qtrly Rev Growth (yoy):0.13-0.070.22
Revenue:1.53B13.46B820.43M
Gross Margin:0.590.300.66
EBITDA:346.51M3.01B311.61M
Operating Margin:0.150.140.12
Net Income:158.15M-878.00MN/A
EPS:2.37-1.070.90
P/E:41.97N/A23.58
PEG (5 yr expected):1.332.141.93
P/S:4.281.852.10

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

My analysis

The stock has a $111 price target from the Point and Figure chart which was almost hit on January 8 after the earnings announcement. 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 41.97 and a forward P/E ratio of 19.09. The company has a book value of $24.16 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are high P/S ratio, high P/E ratio and the intensive insider selling activity.

2. Pharmacyclics (PCYC) is a clinical-stage biopharmaceutical company focused on developing and commercializing innovative small-molecule drugs for the treatment of cancer and immune-mediated diseases.

(click to enlarge)

Insider sells

  • Jesse McGreivy sold 583 shares on January 17 and currently holds 0 shares of the company. Jesse McGreivy is Vice President, Clinical Science.
  • Gregory Hemmi sold 18,000 shares on December 26, 2012 - January 17, 2013 and currently controls 185,992 shares or 0.3% of the company. Gregory Hemmi has served as Vice President, Chemical Operations since May 2006.
  • David Loury sold 70,531 shares on December 20, 2012 - January 9, 2013 and currently controls 5,325 shares or less than 0.1% of the company. David Loury joined Pharmacyclics as Vice President, Preclinical Sciences in May 2006.
  • Maria Fardis sold 6,000 shares on January 7-8 and currently holds 976 shares or less than 0.1% of the company. Maria Fardis has served as Vice President, alliance and global project management since December 2011.
  • Richard van den Broek sold 37,456 shares on December 27-31, 2012 and currently controls 108,445 shares or 0.2% of the company. Richard van den Broek joined the company as a director in March 2008.

Financials

The company reported the fiscal 2013 first quarter, which ended September 30, 2012, financial results on November 5 with the following highlights:

Revenue$102.7 million
Net income$75.6 million
Cash$286.1 million

Pipeline

Presently, Pharmacyclics has three product candidates in clinical development and several preclinical molecules in lead optimization.

(click to enlarge)

My analysis

There have been 10 insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are seven analyst buy ratings, seven neutral ratings and 0 sell ratings, with a average target price of $54.73. None of the company's drugs are yet at the market. I believe there is an opportunity for a short entry in the stock. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are bearish analyst target prices, no drug approvals at least yet with the $4.8 billion market cap and the intensive insider selling activity.

3. Pier 1 Imports (PIR) operates as an importer and specialty retailer of imported decorative home furnishings and gifts primarily in the United States and Canada.

(click to enlarge)

Insider sells

  • Michael Benkel sold 10,000 shares on January 18 and currently controls 102,000 shares or 0.1% of the company. Michael Benkel is Executive Vice President, Planning and Allocations.
  • Sharon Leite sold 20,000 shares on January 9 and currently holds 77,281 shares or less than 0.1% of the company. Sharon Leite is Executive Vice President, Stores.
  • Michael Carter sold 17,000 shares on January 9 and currently controls 148,255 shares or 0.1% of the company. Michael Carter is Senior Vice President and General Counsel, Secretary.
  • Charles Turner sold 12,000 shares on January 2 and currently holds 247,136 shares or 0.2% of the company. Charles Turner is Senior Executive Vice President and Chief Financial Officer of the company.

Financials

The company reported the fiscal 2013 third quarter, which ended November 24, 2012, financial results on December 13, 2012 with the following highlights:

Revenue$424.5 million
Net income$23.7 million
Cash$120.8 million
Debt$9.5 million

Outlook

The company provided the following financial guidance for the fiscal 2013 fourth quarter on a 13-week basis:

  • Comparable store sales growth in the mid single-digit range
  • Earnings per share (GAAP) in the range of $0.55 to $0.59, utilizing an effective tax rate of 38.5%
  • Earnings per share (non-GAAP) in the range of $0.57 to $0.61, utilizing an annual effective tax rate of 35.6%

The company provided the following updated financial guidance for full fiscal year 2013 on a 52-week basis:

  • Comparable store sales growth in the mid single-digit range
  • Earnings per share, on both a GAAP and non-GAAP basis, in the range of $1.17 to $1.21
  • Capital expenditures of approximately $70 to $75 million

News

On January 3, 2013 Pier 1 Imports reported that December comparable store sales increased 8.2% for the five-week period ended December 29, 2012 compared to a reported comparable store sales increase of 11.3% for the five-week period ended December 31, 2011, representing a three-year cumulative comparable store sales increase of 29.8%.

Competition

Pier 1 Imports' competitors include Bed Bath & Beyond (BBBY). Here is a table comparing these two companies.

CompanyPIRBBBYIndustry
Market Cap:2.32B12.30B1.29B
Employees:3,50048,0003.50K
Qtrly Rev Growth (yoy):0.110.150.00
Revenue:1.63B10.25B1.10B
Gross Margin:0.440.410.41
EBITDA:214.11M1.78B72.68M
Operating Margin:0.110.160.04
Net Income:182.95M1.01BN/A
EPS:1.674.381.33
P/E:13.1912.6513.05
PEG (5 yr expected):0.950.991.30
P/S:1.411.201.12

Pier 1 Imports is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

The stock has a $23 price target from the Point and Figure chart and the stock is currently trading at $22. There have been four insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are seven analyst buy ratings, two neutral ratings and 0 sell ratings, with a average target price of $20.50. The stock is trading at a P/E ratio of 13.19 and a forward P/E ratio of 15.84. The company has a book value of $4.55 per share and the stock has a 0.91% dividend yield. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are relatively high P/S ratio, bearish analyst target prices and the intensive insider selling activity.

Source: 3 Stocks With Recent Intensive Insider Selling