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There was intensive insider selling in Isis Pharmaceuticals (ISIS) from September 4, 2012, to September 19, 2012. The stock peaked at $15.61 on September 21, 2012, just two days after the intensive insider selling. The stock traded as low as $7.55 on November 8, 2012.

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With this episode in mind, I decided to screen for stocks that 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. Isis Pharmaceuticals engages in the discovery and development of antisense drugs using antisense drug discovery platform.

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Insider sells

  • Richard Geary sold 6,610 shares on December 13, 2012 - January 16, 2013 and currently holds 4,254 shares or less than 0.1% of the company. Richard Geary is Senior Vice President of Development at Isis Pharmaceuticals.
  • Frank Bennett sold 309 shares on January 16, and currently holds 2,110 shares or less than 0.1% of the company. Frank Bennett is Senior Vice President of Research at Isis Pharmaceuticals.
  • Stanley Crooke sold 1,460 shares on January 16, and currently holds 1,661 shares or less than 0.1% of the company. Stanley Crooke is Founder, Chairman and Chief Executive Officer of Isis Pharmaceuticals.
  • Brett Monia sold 641 shares on January 3-16, and currently holds 5,695 shares or less than 0.1% of the company. Brett Monia is a founding member of Isis and Senior Vice President of Antisense Drug Discovery.
  • Elizabeth Hougen sold 242 shares on January 16, and currently holds 300 shares or less than 0.1% of the company. Elizabeth Hougen is Senior Vice President, Finance & CFO.
  • Lynne Parshall sold 759 shares on January 16, and currently holds 2,941 shares or less than 0.1% of the company. Lynne Parshall is Director, Chief Operating Officer and Chief Financial Officer of Isis Pharmaceuticals.
  • Patrick O'Neil sold 1,538 shares on January 4-17, and currently holds 1,763 shares or less than 0.1% of the company. Patrick O'Neil is Senior Vice President, Legal & General Counsel.

Financials

The company reported the third-quarter financial results on November 6, with the following highlights:

Revenue$11.6 million
Net loss$37.6 million
Cash$343.6 million
Debt$285.2 million

Potential upcoming key milestones

  • Report clinical data from multiple drugs in Isis' pipeline
  • Initiate a Phase 2/3 study of ISIS-TTRRx in patients with familial amyloid polyneuropathy
  • Receive marketing approval of Kynamro in the United States and Europe
  • Earn a $25 million milestone payment from Genzyme following FDA marketing approval for Kynamro

My analysis

There have been 10 insider sell transactions and there have not been any insider buy transactions during the last 30 days. The next catalyst for stock will be the Kynamro Prescription Drug User Fee Act date on January 29, 2013. The Endocrinologic and Metabolic Drugs Advisory Committee of the U.S. Food and Drug Administration already voted 9 to 6 that Genzyme, Isis' partner, had provided sufficient efficacy and safety data to support the marketing of Kynamro. There are four analyst buy ratings, four neutral ratings and one sell rating, with a average target price of $11.40. The three main reasons for the proposed short entry are bearish Point and Figure chart, bearish analyst target prices and the intensive insider selling activity.

2. McKesson Corporation (MCK) delivers pharmaceuticals, medical supplies, and healthcare information technologies to the healthcare industry primarily in the United States.

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Insider selling

  • Jorge Figueredo sold 32,500 shares on January 15-18, pursuant to a Rule 10b5-1(c) trading plan. Jorge Figueredo currently controls 32,767 shares or less than 0.1% of the company. Jorge Figueredo is Executive Vice President of Human Resources of McKesson Corporation.
  • Laureen Seeger sold 17,250 shares on January 17, pursuant to a Rule 10b5-1(c) trading plan. Laureen Seeger currently controls 54,173 shares or less than 0.1% of the company. Laureen Seeger is Executive Vice President, General Counsel and Chief Compliance Officer of McKesson Corporation.
  • Brian Tyler sold 4,000 shares on January 4, pursuant to a Rule 10b5-1(c) trading plan. Brian Tyler currently controls 203 shares or less than 0.1% of the company. Brian Tyler is Executive Vice President of Corporate Strategy and Business Development for McKesson Corporation.

Financials

The company reported the fiscal 2013 second-quarter, which ended September 30, 2012, financial results on October 25 with the following highlights:

Revenue$29.9 billion
Net income$401 million
Cash$2.8 billion
Debt$3.6 billion

Outlook

McKesson expects adjusted earnings per diluted share of $7.15 to $7.35 for the fiscal year ending March 31, 2013, which excludes the following GAAP items:

  • Amortization of acquisition-related intangible assets of approximately 54 cents per diluted share in fiscal 2013.
  • Acquisition expenses and related adjustments expected to add approximately 18 cents per diluted share, including the impact of the $81 million pre-tax gain on business combination related to the acquisition of the remaining 50% ownership in McKesson's corporate headquarters building completed during the first quarter.
  • Litigation reserve adjustments of approximately 15 cents per diluted share.

Competition

McKesson's competitors include AmerisourceBergen Corporation (ABC), Cardinal Health (CAH) and Owens & Minor (OMI). Here is a table comparing these companies.

CompanyMCKABCCAHOMIIndustry
Market Cap:24.47B10.74B15.14B1.93B15.17B
Employees:37,70013,40032,5004,80013.40K
Qtrly Rev Growth (yoy):-0.01N/A-0.030.000.07
Revenue:123.19B79.49B106.65B8.78B106.65B
Gross Margin:0.050.030.040.100.05
EBITDA:2.96B1.43B2.23B251.37M2.23B
Operating Margin:0.020.020.020.020.02
Net Income:1.60B708.19M1.10B107.24MN/A
EPS:6.542.803.161.712.80
P/E:15.8716.2814.0917.8416.36
PEG (5 yr expected):1.151.231.432.021.23
P/S:0.200.140.140.220.20

McKesson's P/S ratio is in-line with the industry average.

My analysis

The stock has a $116 price target from the Point and Figure chart and is currently trading at $105. There have been three different insiders selling and there have not been any insiders buying the shares during the past 30 days. There are eight analyst buy ratings, five neutral ratings and 0 sell ratings, with an average target price of $97.38. The stock is trading at a P/E ratio of 15.87 and a forward P/E ratio of 12.83. The company has a book value of $32.68 per share and the stock has a 0.77% dividend yield. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are bearish analyst target prices and the intensive insider selling activity.

3. Salesforce.com (CRM) provides cloud computing and social enterprise solutions to various businesses and industries worldwide.

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Insider sells

  • Parker Harris sold 21,447 shares on December 26, 2012 - January 22, 2013, pursuant to a 10b5-1 plan. Parker Harris currently holds 27,285 shares or less than 0.1% 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.
  • Graham Smith sold 1,400 shares on January 15, pursuant to a 10b5-1 plan. Graham Smith currently holds 19,764 shares or less than 0.1% of the company. Graham Smith is Executive Vice President and Chief Financial Officer of the company.
  • Frank van Veenendaal sold 25,964 shares on December 24, 2012 - January 9, 2013, pursuant to a 10b5-1 plan. Frank van Veenendaal currently holds 3,133 shares or less than 0.1% of the company. Frank van Veenendaal is vice chairman of salesforce.com and leads the global sales, customer support, and consulting services organizations.
  • Hilarie Koplow sold 4,649 shares on January 4, pursuant to a 10b5-1 plan. Hilarie Koplow currently holds 23,288 shares or less than 0.1% of the company. Hilarie Koplow leads salesforce.com's worldwide sales teams, focusing on growing the company's business globally.
  • Craig Conway sold 500 shares on January 2, pursuant to a 10b5-1 plan. Craig Conway currently holds 5,964 shares or less than 0.1% of the company. Craig Conway serves as a director of the company.
  • Maynard Webb sold 12,000 shares on December 28, 2012, and currently holds 16,300 shares or less than 0.1% of the company. Maynard Webb serves as a director of the company.
  • Marc Benioff sold 412,500 shares on December 26-28, 2012, pursuant to a 10b5-1 plan. Marc Benioff currently holds 10,212,500 shares or 7.2% of the company. Marc Benioff is chairman and CEO of salesforce.com.

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
Debt$514.9 million

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:23.70B165.37B92.43B207.80M
Employees:7,785115,00061,344395.00
Qtrly Rev Growth (yoy):0.350.030.160.22
Revenue:2.85B37.23B20.33B95.73M
Gross Margin:0.780.800.710.71
EBITDA:88.72M17.30B7.04B4.39M
Operating Margin:-0.030.380.290.02
Net Income:-253.68M10.56B3.78BN/A
EPS:-1.822.133.18N/A
P/E:N/A16.4224.4125.87
PEG (5 yr expected):4.021.081.661.16
P/S:8.324.444.553.27

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

My analysis

The stock has a $202 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. The stock is currently trading at a forward P/E ratio of 85.58 and the company has a book value of $14.67 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 forward P/E ratio, high P/S ratio and the intensive insider selling activity.

Source: 3 Stocks With Recent Intensive Insider Selling