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There was intensive insider selling in Millennial Media (NYSE:MM) in October, 2012. The stock has been trending down since the intensive insider selling took place.

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Here is a table of Millennial Media's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
February 201300
January 201300
December 201200
November 201200
October 20128,370,2340
September 201200
August 201200
July 201200
June 201200
May 201200
April 20121,782,9850

By looking at this table, we can see that the insider selling in Millennial Media peaked at the same time with the stock price top. With this episode in mind, I screened 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%.

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

1. E. I. du Pont de Nemours and Company (NYSE:DD) operates as a science and technology based company worldwide.

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Insider selling by insider (last 30 days)

  • Benito Cachinero sold 7,224 shares on February 8-12 and currently holds 75,567 shares or less than 0.1% of the company. Benito Cachinero is senior vice president of DuPont Human Resources.
  • Lois Juliber sold 5,700 shares on February 4 pursuant to a Rule 10b5-1 trading plan. Lois Juliber currently holds 50,489 shares or less than 0.1% of the company. Lois Juliber serves as a director of the company.
  • Mark Vergnano sold 9,751 shares on February 1 pursuant to a Rule 10b5-1 trading plan. Mark Vergnano currently holds 93,700 shares or less than 0.1% of the company. Mark Vergnano is executive vice president.
  • Thomas Connelly sold 60,000 shares on January 31 pursuant to a Rule 10b5-1 trading plan. Thomas Connelly currently holds 166,754 shares or less than 0.1% of the company. Thomas Connelly is executive vice president, chief innovation officer.
  • Nicholas Fanandakis sold 2,649 shares on January 18 pursuant to a Rule 10b5-1 trading plan. Nicholas Fanandakis currently holds 122,806 shares or less than 0.1% of the company. Nicholas Fanandakis is executive vice president and chief financial officer.
  • Ellen Kullman sold 80,000 shares on January 18 pursuant to a Rule 10b5-1 trading plan. Ellen Kullman currently holds 419,399 shares or less than 0.1% of the company. Ellen Kullman is chair of the board and chief executive officer of DuPont.

Insider selling by calendar month

Here is a table of DuPont's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
February 201322,6750
January 2013161,6990
December 201200
November 201200
October 201200
September 2012104,5670
August 201200
July 201214,0000
June 201200

There have been more shares sold already this year than there were sold during the last six months of 2012.

Financials

The company reported the full-year 2012 financial results on January 22, with the following highlights:

Revenue$34.8 billion
Net income$2.8 billion
Cash$4.4 billion
Debt$11.8 billion

Outlook

2013 outlook for operating earnings is $3.85 to $4.05 per share, an increase of 2 to 7 percent over the prior year. First half 2013 operating earnings are expected to decline modestly on a year-over-year basis. Additionally, full-year 2013 sales are expected to be about $36 billion.

Competition

DuPont's competitors include BASF (OTCQX:BASFY) and The Dow Chemical Company (NYSE:DOW). Here is a table comparing these companies.

CompanyDDBASFYDOWIndustry Average (Chemicals - Major Diversified)
Market Cap:44.38B88.48B38.11B1.60B
Employees:70,000113,45254,0001.05K
Qtrly Rev Growth (yoy):-0.010.08-0.010.09
Revenue:35.04B99.88B56.79B1.81B
Gross Margin:0.290.260.160.25
EBITDA:6.23B15.31B6.66B145.82M
Operating Margin:0.130.110.070.06
Net Income:2.46B6.51B842.00MN/A
EPS:2.957.080.700.82
P/E:16.1013.6046.3113.88
PEG (5 yr expected):2.094.052.110.98
P/S:1.270.890.670.76

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

My analysis

The stock has a $32 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 16.10 and a forward P/E ratio of 10.80. The company has a book value of $10.81 per share and the stock has a 3.66% dividend yield. I believe there is an opportunity for a short entry with a $32 price target from the Point and Figure chart. I would place a stop loss at $52, which is the six month high. The two main reason for the proposed short entry are relatively high P/S ratio and the intensive insider selling activity.

2. Intuitive Surgical (NASDAQ:ISRG) designs, manufactures, and markets da Vinci surgical systems, and related instruments and accessories.

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Insider selling by insider (last 30 days)

  • Jerome McNamara sold 8,464 shares on January 28 pursuant to a Rule 10b5-1 trading plan. Jerome McNamara currently holds 2,710 shares or less than 0.1% of the company. Jerome McNamara is Executive Vice President, Worldwide Sales and Marketing.
  • Marshall Mohr sold 8,000 shares on January 28 pursuant to a Rule 10b5-1 trading plan. Marshall Mohr currently holds 1,242 shares or less than 0.1% of the company. Marshall Mohr is Senior Vice President and Chief Financial Officer.
  • Mark Meltzer sold 10,000 shares on January 25 pursuant to a Rule 10b5-1 trading plan. Mark Meltzer currently holds 567 shares or less than 0.1% of the company. Mark Meltzer is Senior Vice President, General Counsel.
  • Gary Guthart sold 4,500 shares on January 25 pursuant to a Rule 10b5-1 trading plan. Gary Guthart currently holds 37,653 shares or less than 0.1% of the company. Gary Guthart is President and Chief Executive Officer, Member of the Board of Directors.
  • Eric Halvorson sold 1,500 shares on January 25 pursuant to a Rule 10b5-1 trading plan. Eric Halvorson currently holds 1,871 shares or less than 0.1% of the company. Eric Halvorson has been a member of the company's Board of Directors since June 2003.

Insider selling by calendar month

Here is a table of Intuitive Surgical's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
January 201332,4640
December 20126,4370
November 2012109,4220
October 201251,5500
September 20121,2500
August 20122,0000
July 201226,3000
June 20123,3440
May 201200
April 2012104,8440
March 20124,5940
February 20129,7600

January 2013 has been the fourth largest insider selling month during the past 12 months.

Financials

The company reported the full-year 2012 financial results on January 22, with the following highlights:

Revenue$2.2 billion
Net income$656.6 million
Cash$2.9 billion

Competition

Intuitive Surgical's competitors include Accuray (NASDAQ:ARAY) and Medtronic (NYSE:MDT). Here is a table comparing these companies.

CompanyISRGARAYMDTIndustry Average (Medical Appliances & Equipment)
Market Cap:23.00B325.27M47.67B111.95M
Employees:2,3621,10044,944241.00
Qtrly Rev Growth (yoy):0.23-0.270.020.16
Revenue:2.18B362.88M16.32B48.74M
Gross Margin:0.720.340.760.58
EBITDA:935.90M-44.46M5.45B900.28K
Operating Margin:0.40-0.210.280.01
Net Income:656.60M-82.93M3.24BN/A
EPS:15.98-1.233.29N/A
P/E:35.86N/A14.3421.58
PEG (5 yr expected):1.810.021.961.29
P/S:10.660.892.922.68

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

My analysis

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 35.86 and a forward P/E ratio of 28.11. The company has a book value of $89.05 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.

3. DealerTrack Technologies (NASDAQ:TRAK) provides Web-based software solutions to the automotive retail industry in the United States and Canada.

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Insider selling by insider (last 30 days)

  • John McDonnell sold 2,000 shares on February 1 pursuant to a Rule 10b5-1 trading plan. John McDonnell currently holds 49,407 shares or 0.1% of the company. John McDonnell has served as a director of DealerTrack since July 2005.
  • Richard McLeer sold 26,200 shares on January 4-29 pursuant to a Rule 10b5-1 trading plan. Richard McLeer currently holds 32,047 shares or less than 0.1% of the company. Richard McLeer has served as Senior Vice President and Chief Information Officer since January 2009.
  • Eric Jacobs sold 7,500 shares on January 29 pursuant to a Rule 10b5-1 trading plan. Eric Jacobs currently holds 28,530 shares or less than 0.1% of the company. Eric Jacobs was named Senior Vice President, Chief Financial and Administrative Officer in 2012.
  • Mark O'Neil sold 7,594 shares on January 28 pursuant to a Rule 10b5-1 trading plan. Mark O'Neil currently holds 215,284 shares or 0.5% of the company. Mark O'Neil has served as Chairman of the Board, President and Chief Executive Officer since May 2005 and has served as a member of the board of directors since August 2001.
  • Rajesh Sundaram sold 16,244 shares on January 2-29 pursuant to a Rule 10b5-1 trading plan. Rajesh Sundaram currently holds 64,165 shares or 0.2% of the company. Rajesh Sundaram was named Senior Vice President, Solutions Group, Marketing and DealerTrack Canada in 2012.
  • Rick Von Pusch sold 2,435 shares on January 28 pursuant to a Rule 10b5-1 trading plan. Rick Von Pusch currently holds 36,143 shares or 0.1% of the company. Rick Von Pusch was named Senior Vice President, DMS, Sales and Service in 2012.

Insider selling by calendar month

Here is a table of DealerTrack's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
February 20132,0000
January 201361,9730
December 201210,0000
November 201256,2840
October 201200
September 20126,9900
August 201227,1310
July 201200
June 2012122,0000
May 20122,0000
April 201219,8350
March 201289,5930
February 20122,3760

January 2013 has been the highest insider selling month since June 2012.

Financials

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

Revenue$99.1 million
Net loss$2.9 million
Cash$209.1 million
Debt$160.3 million

Outlook

DealerTrack updated its 2012 annual guidance based on its third quarter results and for the acquisitions of ClickMotive and the assets of Ford Motor Company of Canada Limited's iCONNECT Direct DMS business as follows:

  • Revenue for the year is expected to be between $387.0 million and $390.0 million, an increase from prior guidance of between $381.0 million and $385.0 million.
  • GAAP net income for the year is expected to be between $21.5 million and $23.0 million, a decrease from prior guidance of between $24.5 million and $26.5 million.
  • Diluted GAAP net income per share for the year is expected to be between $0.49 and $0.52, a decrease from prior guidance of between $0.55 and $0.60 per share.

Competition

DealerTrack's competitors include Automatic Data Processing (NASDAQ:ADP). Here is a table comparing these two companies.

CompanyTRAKADPIndustry Average (Internet Software & Services)
Market Cap:1.35B28.89B134.25M
Employees:1,90057,000405.00
Qtrly Rev Growth (yoy):0.030.060.22
Revenue:378.36M10.81B95.61M
Gross Margin:0.430.490.52
EBITDA:53.65M2.36B1.73M
Operating Margin:0.040.190.00
Net Income:52.83M1.39BN/A
EPS:1.212.83N/A
P/E:26.2721.0240.50
PEG (5 yr expected):2.132.221.15
P/S:3.572.671.54

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

My analysis

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 26.27 and a forward P/E ratio of 24.11. The company has a book value of $13.22 per share. 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 relatively high P/S ratio and the intensive insider selling activity.

Source: 3 Stocks With Recent Intensive Insider Selling