3 Stocks With Recent Intensive Insider Selling

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 |  Includes: CBS, MDT, VOLC
by: Markus Aarnio

There was intensive insider selling in Volcano Corporation (NASDAQ:VOLC) in July 2012 around $30 level. The stock is currently trading at $22.63, 25% below the July peak.

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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. Volcano Corporation designs, develops, manufactures, and commercializes intravascular ultrasound and fractional flow reserve products used in the diagnosis and treatment of vascular and structural heart disease.

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Insider selling by insider (last 30 days)

  • David Sheehan sold 3,839 shares on February 5-21 and currently holds 25,035 shares or less than 0.1% of the company. David Sheehan has served as Chief Operating Officer since February 2012.
  • Darin Lippoldt sold 658 shares on February 19-21 and currently holds 2,542 shares or less than 0.1% of the company. Darin Lippoldt has served as Senior Vice President and General Counsel since August 2010.
  • John Dahldorf sold 4,695 shares on February 5-21 and currently holds 44,089 shares or less than 0.1% of the company. John Dahldorf has served as Chief Financial Officer since July 2003.
  • Scott Huennekens sold 12,039 shares on February 5-21 and currently holds 68,469 shares or 0.1% of the company. Scott Huennekens has served as President and Chief Executive Officer since April 2002.
  • Dale Flanders sold 2,198 shares on February 6-21 and currently holds 11,831 shares or less than 0.1% of the company. Dale Flanders is General Manager of the company.
  • Michel Lussier sold 3,280 shares on February 6 and currently holds 12,953 shares or less than 0.1% of the company. Michel Lussier has served as President, Clinical and Scientific Affairs since October 2012.
  • Jorge Quinoy sold 10,000 shares on February 5 pursuant to a rule 10b5-1 trading plan. Jorge Quinoy currently holds 101,873 shares or 0.2% of the company. Jorge Quinoy is Vice President, Worldwide Sales & Marketing.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
February 2013 36,709 0
January 2013 0 0
December 2012 6,750 0
November 2012 6,750 0
October 2012 16,750 0
September 2012 13,750 0
August 2012 6,750 0
July 2012 43,219 0
June 2012 0 0
May 2012 10,463 0
April 2012 53,643 0
March 2012 82,500 0
February 2012 8,972 0
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The month of February 2013 has seen the most insider selling since July 2012.

Financials

The company reported the full year 2012 financial results on February 21 with the following highlights:

Revenue $381.9 million
Net income $8.0 million
Cash $471.6 million
Debt $383.4 million
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Outlook

The company provided guidance for fiscal 2013. It expects revenues will be in the range of $422.0 million - $428.0 million. It expects gross margins will be in the range of 65-66 percent and operating expenses will be 61-62 percent of revenues. The company expects a net loss on a GAAP basis of $0.10-$0.14 per share in 2013 and non-GAAP net income of $0.16-$0.20 per diluted share in 2013. Non-GAAP results exclude acquisition-related expenses, amortization of intangibles and non-cash interest expense. The company expects weighted average basic shares in 2013 will be approximately 54.4 million shares and approximately 56.2 million shares on a diluted basis. All guidance for 2013 is provided on a constant currency basis.

Competition

Volcano's competitors include Boston Scientific Corporation (NYSE:BSX) and St. Jude Medical (NYSE:STJ). Here is a table comparing these companies.

Company VOLC BSX STJ Industry Average (Medical Appliances & Equipment)
Market Cap: 1.22B 9.99B 12.77B 894.74M
Employees: 1,289 N/A N/A 2.87K
Qtrly Rev Growth (yoy): 0.09 -0.02 -0.03 0.18
Revenue: 372.14M 7.25B 5.50B 368.45M
Gross Margin: 0.66 0.66 0.74 0.62
EBITDA: 46.71M 1.62B 1.77B 94.39M
Operating Margin: 0.06 0.13 0.27 0.10
Net Income: 34.97M -4.07B 752.00M N/A
EPS: 0.64 -2.89 2.39 0.74
P/E: 35.53 N/A 17.24 21.99
PEG (5 yr expected): 3.35 2.00 1.18 1.25
P/S: 3.57 1.36 2.29 2.68
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Volcano is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

The stock has a $11 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 trading at a P/E ratio of 35.53 and a forward P/E ratio of 75.43. The company has a book value of $6.85 per share. I believe there is an opportunity for a short entry with the $11 price target from the Point and Figure chart. I would place a stop loss at $30, which is the six-month high. The four main reasons for the proposed short entry are relatively high P/S ratio, high P/E ratio, weak guidance and the intensive insider selling activity.

2. CBS Corporation (NYSE:CBS) operates as a mass media company in the United States and internationally.

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Insider selling by insider (last 30 days)

  • Sumner Redstone sold 278,219 shares on February 19 and currently controls approximately 79% of the company's voting Class A common stock, and approximately 6% of the company's Class A common stock and Class B common stock on a combined basis. Sumner Redstone serves as Chairman of the Board of both CBS Corporation and Viacom (NASDAQ:VIA), roles he assumed after the separation of Viacom into two publicly traded companies, which occurred in January 2006. Mr. Redstone is the controlling shareholder of both companies.
  • William Cohen sold 12,734 shares on February 19 and currently holds 44,108 shares or less than 0.1% of the company. William Cohen serves as a director of the company.
  • Joseph Califano sold 12,734 shares on February 19 and currently holds 46,120 shares or less than 0.1% of the company. Joseph Califano serves as a director of the company.
  • Louis Briskman sold 25,000 shares on February 1 pursuant to a Rule 10b5-1 trading plan. Louis Briskman currently holds 251,188 shares or less than 0.1% of the company. Louis Briskman serves as the Executive Vice President and General Counsel of CBS Corporation.
  • Joseph Ianniello sold 32,358 shares on February 1-4 pursuant to a Rule 10b5-1 trading plan. Joseph Ianniello currently holds 94,722 shares or less than 0.1% of the company. Joseph Ianniello serves as Executive Vice President and Chief Financial Officer for CBS Corporation.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
February 2013 361,045 0
January 2013 25,000 0
December 2012 25,000 0
November 2012 555,207 0
October 2012 337,500 0
September 2012 73,150 0
August 2012 880,952 1,500
July 2012 287,500 0
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The insider selling has picked up again in February 2013 after slow December 2012 - January 2013 period.

Financials

The company reported the full year 2012 financial results on February 14 with the following highlights:

Revenue $14.09 billion
Net income $1.57 billion
Cash $708 million
Debt $5.92 billion
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Competition

CBS Corporation's competitors include News Corp. (NASDAQ:NWS) and The Walt Disney Company (NYSE:DIS). Here is a table comparing these companies.

Company CBS NWS DIS Industry Average (Broadcasting -TV)
Market Cap: 27.78B 67.92B 98.58B 2.19B
Employees: N/A 48,000 166,000 1.20K
Qtrly Rev Growth (yoy): -0.02 0.05 0.05 0.17
Revenue: 14.09B 34.33B 42.84B 1.32B
Gross Margin: 1.00 0.38 0.21 0.43
EBITDA: 3.49B 6.86B 10.90B 77.14M
Operating Margin: 0.21 0.17 0.21 0.18
Net Income: 1.63B 4.00B 5.60B N/A
EPS: 2.39 1.67 3.10 0.23
P/E: 18.34 17.51 17.61 25.31
PEG (5 yr expected): 1.23 N/A 1.42 2.90
P/S: 1.97 1.98 2.30 1.65
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CBS Corporation is growing below the industry average growth rate.

My analysis

The stock has met its $42.5 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. There are 11 analyst buy ratings, four neutral ratings and 0 sell ratings, with an average target price of $41.33. The stock is trading at a P/E ratio of 18.34 and a forward P/E ratio of 12.93. The company has a book value of $16.15 per share and the stock has a dividend yield of 1.10%. 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 slow revenue growth, bearish analyst target prices and the intensive insider selling activity.

3. Covidien (COV) develops, manufactures, and sells healthcare products for use in clinical and home settings worldwide.

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Insider selling by insider (last 30 days)

  • Jose Almeida sold 110,144 shares on February 14 and currently holds 201,224 shares or less than 0.1% of the company. Jose Almeida has been the President, Chief Executive Officer and a Director of Covidien since July 2011.
  • Michael Dunford sold 11,029 shares on February 12 and currently holds 25,252 shares or less than 0.1% of the company. Michael Dunford is Senior Vice President, Human Resources of Covidien, a position he has held since July 2009.
  • Bryan Hanson sold 3,136 shares on February 8-11 and currently holds 20,244 shares or less than 0.1% of the company. Bryan Hanson is Group President of Covidien, a position he has held since July 2011.
  • Coleman Lannum sold 1,500 shares on February 8-12 and currently holds 9,451 shares or less than 0.1% of the company. Coleman Lannum is Vice President of Investor Relations of Covidien.
  • Charles Dockendorff sold 32,457 shares on February 11 and currently holds 135,572 shares or less than 0.1% of the company. Charles Dockendorff is Executive Vice President and Chief Financial Officer of Covidien, a position he has held since 1995.
  • Christopher Coughlin sold 36,000 shares on February 5 and currently holds 46,132 shares or less than 0.1% of the company. Christopher Coughlin serves as a director of the company.
  • Amy Wendell sold 15,000 shares on January 25 pursuant to a Rule 10b5-1 trading plan. Amy Wendell currently holds 50,856 shares or less than 0.1% of the company. Amy Wendell is Senior Vice President of Strategy and Business Development of Covidien, a position she has held since December 2006.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
February 2013 194,266 0
January 2013 45,416 0
December 2012 418,243 0
November 2012 310,266 17,500
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There have been 968,191 shares sold and 17,500 shares purchased since November 2012.

Financials

The company reported the first-quarter fiscal 2013, which ended December 28, 2012, financial results on January 25 with the following highlights:

Revenue $3.06 billion
Net income $493 million
Cash $1.4 billion
Debt $5.1 billion
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Outlook

Covidien updated its fiscal 2013 guidance to reflect the recent U.S. FDA approval of generic Concerta, the extension of the R&D tax credit and better operational performance thus far in the fiscal year. The company now estimates that net sales in fiscal 2013 will be up 5% to 8%, including foreign exchange at current rates. This compares with prior guidance of a 3% to 6% sales increase in 2013. Net sales are now expected to be up 5% to 8% versus 2012 in the Medical Devices segment and up high single digits or better in the Pharmaceuticals segment. For Medical Supplies, 2013 net sales are now expected to be 1% to 3% above 2012. There is no change to the forecast for operating margin, excluding the impact of one-time items, which is still expected to be in the 22% to 23% range. The effective tax rate, excluding one-time items, is now expected to be in the 17.5% to 18.5% range, compared with prior guidance of 18% to 19%.

While the planned spin-off of the Pharmaceuticals business may have a somewhat dilutive effect on Covidien's 2013 guidance, the underlying operational strength of the business, coupled with the expected benefits from generic Concerta ER tablets, will temper the expected dilution.

Competition

Covidien's competitors include Becton, Dickinson and Company (NYSE:BDX), CR Bard (NYSE:BCR) and Johnson & Johnson (NYSE:JNJ). Here is a table comparing these companies.

Company COV BDX BCR JNJ Industry Average (Medical Instruments & Supplies)
Market Cap: 29.64B 17.05B 8.09B 211.31B 704.93M
Employees: 43,400 29,555 N/A 128,000 2.56K
Qtrly Rev Growth (yoy): 0.06 0.04 0.01 0.08 0.42
Revenue: 12.01B 7.78B 2.96B 67.22B 89.06M
Gross Margin: 0.57 0.52 0.62 0.68 0.61
EBITDA: 3.25B 2.13B 954.80M 20.54B -9.68M
Operating Margin: 0.22 0.21 0.28 0.25 0.13
Net Income: 1.90B 1.13B 520.10M 10.85B N/A
EPS: 3.94 7.48 6.16 3.86 0.30
P/E: 15.96 11.75 15.95 19.76 26.44
PEG (5 yr expected): 1.61 2.00 1.81 2.21 0.74
P/S: 2.45 2.17 2.76 3.14 4.16
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Covidien is trading below the industry average P/S ratio.

My analysis

There have been seven insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are nine analyst buy ratings, one neutral rating and 0 sell ratings, with an average target price of $61.00. The stock is trading at a P/E ratio of 15.96 and a forward P/E ratio of 12.79. The company has a book value of $22.98 per share and the stock has a 1.66% 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.

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