3 Stocks With Recent Intensive Insider Selling

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 |  Includes: CSCO, HCP, HNT
by: Markus Aarnio

There was intensive insider selling in Verifone Systems (NYSE:PAY) in April 2012 around the $50 level. The stock is currently trading at $18.65, which is 65% below the April 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. HCP, Inc. (NYSE:HCP) is an independent hybrid real estate investment trust. The fund invests in real estate markets of the United States.

Insider selling by insider (last 30 days)

  • Scott Anderson sold 7,786 shares on February 14 and currently holds 27,449 shares or less than 0.1% of the company. Scott Anderson is Senior Vice President.
  • Edward Henning sold 91,659 shares on January 25 - February 22 and currently holds 52,931 shares or less than 0.1% of the company. Edward Henning is Executive Vice President.
  • Susan Tate sold 19,656 shares on February 21 and currently holds 47,079 shares or less than 0.1% of the company. Susan Tate is Executive Vice President - Post-Acute and Hospitals.
  • Kenneth Roath sold 18,000 shares on February 21 and currently holds 238,013 shares or less than 0.1% of the company. Kenneth Roath serves as a director of the company.
  • Timothy Schoen sold 33,989 shares on February 15 and currently holds 67,028 shares or less than 0.1% of the company. Timothy Schoen is Executive Vice President and Chief Financial Officer.
  • Jonathan Bergschneider sold 28,950 shares on February 19-20 and currently holds 21,311 shares or less than 0.1% of the company. Jonathan Bergschneider is Executive Vice President - Life Science Estates.
  • Thomas Kirby sold 26,658 shares on January 25 - February 19 pursuant to a Rule 10b5-1 trading plan. Thomas Kirby currently holds 50,467 shares or less than 0.1% of the company. Thomas Kirby is Executive Vice President - Acquisitions and Valuations.
  • Kendall Young sold 5,793 shares on February 14 and currently holds 18,645 shares or less than 0.1% of the company. Kendall Young is Executive Vice President - Senior Housing.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
February 2013 218,991 0
January 2013 77,510 0
December 2012 1,000 0
November 2012 4,400 0
October 2012 1,000 0
September 2012 3,279 0
August 2012 97,434 0
July 2012 61,312 0
June 2012 219,604 0
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The month of February 2013 has seen the most insider selling since June 2012.

Financials

The company reported the full year 2012 financial results on February 12 with the following highlights:

Revenue $1.9 billion
Net income $812.3 million
Cash $247.7 million
Debt $8.7 billion
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2013 Outlook

Full year guidance, not including the impact of any future acquisitions, for FFO of $2.92 - $2.98 per share and FAD of $2.39 - $2.45 per share, representing growth rates, as measured by the mid-point of estimates, of 6% and 9%, over 2012 FFO as adjusted and FAD amounts, respectively; earnings per share guidance of $1.95 - $2.01.

Competition

HCP's competitors include Health Care REIT (NYSE:HCN), Healthcare Realty Trust (NYSE:HR) and Ventas (NYSE:VTR). Here is a table comparing these companies.

Company HCP HCN HR VTR Industry Average (REIT - Healthcare Facilities)
Market Cap: 22.04B 16.78B 2.26B 20.47B 2.26B
Employees: 149 308 N/A 439 260.00
Qtrly Rev Growth (yoy): 0.11 0.28 0.08 0.17 -0.20
Revenue: 1.90B 1.80B 316.35M 2.50B 315.27M
Gross Margin: 0.85 0.66 0.63 0.61 0.62
EBITDA: 1.53B 1.11B 183.33M 1.37B 182.47M
Operating Margin: 0.62 0.32 0.26 0.28 0.28
Net Income: 778.33M 115.40M 7.74M 305.57M N/A
EPS: 1.90 0.72 0.07 1.23 1.23
P/E: 25.64 89.47 375.94 56.83 56.83
PEG (5 yr expected): 2.51 2.67 2.87 2.82 2.87
P/S: 11.59 9.33 7.18 8.18 8.18
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HCP is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been eight insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are three analyst buy ratings, 10 neutral ratings and two sell ratings, with an average target price of $40.57. The stock is trading at a P/E ratio of 25.64 and a forward P/E ratio of 22.50. The company has a book value of $23.28 per share and the stock has a dividend yield of 4.32%. 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.

2. Health Net (NYSE:HNT) provides managed health care services.

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Insider selling by insider (last 30 days)

  • Angelee Bouchard sold 5,584 shares on February 20 and currently holds 17,537 shares or less than 0.1% of the company. Angelee Bouchard is Senior Vice President, General Counsel, Secretary.
  • James Woys sold 71,184 shares on February 13-19 pursuant to a Rule 10b5-1 trading plan. James Woys currently holds 216,491 shares or 0.3% of the company. James Woys is Executive Vice President, Chief Operating Officer.
  • Patricia Clarey sold 10,000 shares on February 13 pursuant to a Rule 10b5-1 trading plan. Patricia Clarey currently holds 32,970 shares or less than 0.1% of the company. Patricia Clarey is Senior Vice President, Chief Regulatory Officer.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
February 2013 86,768 0
January 2013 0 0
December 2012 3,166 0
November 2012 0 0
October 2012 0 0
September 2012 0 0
August 2012 0 0
July 2012 0 0
June 2012 0 0
May 2012 550 0
April 2012 44,718 0
March 2012 147,230 0
February 2012 83,664 0
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The month of February 2013 has seen the most insider selling since March 2012.

Financials

The company reported the full year 2012 financial results on January 30 with the following highlights:

Revenue $11.3 billion
Net income $121.2 million
Cash $2.2 billion
Debt $499.1 million
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Outlook

The company's guidance for 2013 is as follows:

Revenue $10.7 billion to $11.2 billion
Earnings per share $2.00 to $2.10
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Competition

Health Net's competitors include UnitedHealth Group (NYSE:UNH) and WellPoint (WLP). Here is a table comparing these companies.

Company HNT UNH WLP Industry Average (Health Care Plans)
Market Cap: 2.08B 55.83B 19.03B 2.53B
Employees: N/A 133,000 N/A 4.80K
Qtrly Rev Growth (yoy): 0.01 0.11 0.01 0.28
Revenue: 11.28B 110.62B 61.71B 11.28B
Gross Margin: 0.12 0.27 0.22 0.14
EBITDA: 94.66M 10.15B 5.12B 316.67M
Operating Margin: 0.01 0.08 0.07 0.04
Net Income: 24.81M 5.53B 2.66B N/A
EPS: 1.46 5.28 8.18 4.22
P/E: 17.55 10.32 7.57 17.55
PEG (5 yr expected): 1.47 0.90 0.67 1.47
P/S: 0.18 0.50 0.31 0.44
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Health Net is growing slower than the industry, which could explain some of the insider selling.

My analysis

There have been four 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 17.55 and a forward P/E ratio of 9.78. The company has a book value of $19.11 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 slow revenue growth and the intensive insider selling activity.

3. Cisco Systems (NASDAQ:CSCO) designs, manufactures, and sells Internet protocol based networking and other products related to the communications and information technology industries worldwide.

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Insider selling by insider (last 30 days)

  • Randall Pond sold 71,500 shares on February 21 and currently controls 406,982 shares or less than 0.1% of the company. Randall Pond is Executive Vice President of Operations, Processes, and Systems at Cisco.
  • Robert Lloyd sold 30,000 shares on February 19 pursuant to a Rule 10b5-1 trading plan. Robert Lloyd currently holds 690,520 shares or less than 0.1% of the company. Robert Lloyd is President, Development and Sales.
  • John Hennessy sold 15,000 shares on February 19 pursuant to a Rule 10b5-1 trading plan. John Hennessy currently controls 62,372 shares or less than 0.1% of the company. John Hennessy serves as a director of the company.
  • Blair Christie sold 53,303 shares on February 19-20 pursuant to a Rule 10b5-1 trading plan. Blair Christie currently holds 406,515 shares or less than 0.1% of the company. Blair Christie is Cisco's Chief Marketing Officer.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
February 2013 169,803 0
January 2013 25,000 0
December 2012 106,260 0
November 2012 0 0
October 2012 0 0
September 2012 199,901 0
August 2012 25,000 0
July 2012 0 0
June 2012 10,000 0
May 2012 31,000 0
April 2012 0 0
March 2012 470,002 0
February 2012 585,000 0
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The month of February 2013 has seen the most insider selling since September 2012.

Financials

The company reported the second-quarter fiscal 2013, which ended January 26, financial results on February 13 with the following highlights:

Revenue $12.1 billion
Net income $3.1 billion
Cash $46.4 billion
Debt $16.3 billion
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Competition

Cisco's competitors include Alcatel-Lucent (ALU), Hewlett-Packard (NYSE:HPQ) and Juniper Networks (NYSE:JNPR). Here is a table comparing these companies.

Company CSCO ALU HPQ JNPR Industry Average (Networking & Communication Devices)
Market Cap: 111.44B 3.22B 37.50B 10.89B 3.92B
Employees: 66,639 N/A 331,800 N/A 847.00
Qtrly Rev Growth (yoy): 0.05 -0.01 -0.06 0.02 1.62
Revenue: 47.25B 18.70B 118.68B 4.37B 836.86M
Gross Margin: 0.61 0.30 0.23 0.62 0.76
EBITDA: 13.36B 534.71M 14.30B 543.90M 137.39M
Operating Margin: 0.23 -0.03 0.08 0.08 0.12
Net Income: 9.32B -2.64B -12.89B 186.50M N/A
EPS: 1.74 -0.79 -6.55 0.35 0.33
P/E: 12.02 N/A N/A 61.29 49.33
PEG (5 yr expected): 1.25 0.44 22.32 1.24 6.85
P/S: 2.36 0.17 0.32 2.49 13.81
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Cisco is trading below the industry average P/S ratio.

My analysis

There have been four 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 12.02 and a forward P/E ratio of 9.91. The company has a book value of $10.44 per share and the stock has a 2.68% dividend yield. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is the intensive insider selling activity.

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