3 Stocks With Recent Intensive Insider Selling

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 |  Includes: DD, ISRG, TRAK
by: Markus Aarnio

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.

Month Insider selling / shares Insider buying / shares
February 2013 0 0
January 2013 0 0
December 2012 0 0
November 2012 0 0
October 2012 8,370,234 0
September 2012 0 0
August 2012 0 0
July 2012 0 0
June 2012 0 0
May 2012 0 0
April 2012 1,782,985 0
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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.

Month Insider selling / shares Insider buying / shares
February 2013 22,675 0
January 2013 161,699 0
December 2012 0 0
November 2012 0 0
October 2012 0 0
September 2012 104,567 0
August 2012 0 0
July 2012 14,000 0
June 2012 0 0
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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
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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.

Company DD BASFY DOW Industry Average (Chemicals - Major Diversified)
Market Cap: 44.38B 88.48B 38.11B 1.60B
Employees: 70,000 113,452 54,000 1.05K
Qtrly Rev Growth (yoy): -0.01 0.08 -0.01 0.09
Revenue: 35.04B 99.88B 56.79B 1.81B
Gross Margin: 0.29 0.26 0.16 0.25
EBITDA: 6.23B 15.31B 6.66B 145.82M
Operating Margin: 0.13 0.11 0.07 0.06
Net Income: 2.46B 6.51B 842.00M N/A
EPS: 2.95 7.08 0.70 0.82
P/E: 16.10 13.60 46.31 13.88
PEG (5 yr expected): 2.09 4.05 2.11 0.98
P/S: 1.27 0.89 0.67 0.76
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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.

Month Insider selling / shares Insider buying / shares
January 2013 32,464 0
December 2012 6,437 0
November 2012 109,422 0
October 2012 51,550 0
September 2012 1,250 0
August 2012 2,000 0
July 2012 26,300 0
June 2012 3,344 0
May 2012 0 0
April 2012 104,844 0
March 2012 4,594 0
February 2012 9,760 0
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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
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Competition

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

Company ISRG ARAY MDT Industry Average (Medical Appliances & Equipment)
Market Cap: 23.00B 325.27M 47.67B 111.95M
Employees: 2,362 1,100 44,944 241.00
Qtrly Rev Growth (yoy): 0.23 -0.27 0.02 0.16
Revenue: 2.18B 362.88M 16.32B 48.74M
Gross Margin: 0.72 0.34 0.76 0.58
EBITDA: 935.90M -44.46M 5.45B 900.28K
Operating Margin: 0.40 -0.21 0.28 0.01
Net Income: 656.60M -82.93M 3.24B N/A
EPS: 15.98 -1.23 3.29 N/A
P/E: 35.86 N/A 14.34 21.58
PEG (5 yr expected): 1.81 0.02 1.96 1.29
P/S: 10.66 0.89 2.92 2.68
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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.

Month Insider selling / shares Insider buying / shares
February 2013 2,000 0
January 2013 61,973 0
December 2012 10,000 0
November 2012 56,284 0
October 2012 0 0
September 2012 6,990 0
August 2012 27,131 0
July 2012 0 0
June 2012 122,000 0
May 2012 2,000 0
April 2012 19,835 0
March 2012 89,593 0
February 2012 2,376 0
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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
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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.

Company TRAK ADP Industry Average (Internet Software & Services)
Market Cap: 1.35B 28.89B 134.25M
Employees: 1,900 57,000 405.00
Qtrly Rev Growth (yoy): 0.03 0.06 0.22
Revenue: 378.36M 10.81B 95.61M
Gross Margin: 0.43 0.49 0.52
EBITDA: 53.65M 2.36B 1.73M
Operating Margin: 0.04 0.19 0.00
Net Income: 52.83M 1.39B N/A
EPS: 1.21 2.83 N/A
P/E: 26.27 21.02 40.50
PEG (5 yr expected): 2.13 2.22 1.15
P/S: 3.57 2.67 1.54
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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.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in DD 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.