3 Tech Stocks With Recent Intensive Insider Selling

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 |  Includes: DWRE, GWRE, Z
by: Markus Aarnio

The technology sector has been the worst performing group over the recent six month period with a gain of just 0.7%.

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For this article, I screened for technology 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 technology sector stocks that met these three criteria of intensive insider selling in the last 30 days.

1. Guidewire Software (NYSE:GWRE) provides system software to the property and casualty (P&C) insurance industry primarily in the United States, Canada, and Australia.

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Insider selling by insider (last 30 days)

  • Priscilla Hung sold 16,400 shares on February 27 pursuant to a Rule 10b5-1 trading plan. Priscilla Hung currently holds 30,448 shares or less than 0.1% of the company. Priscilla Hung serves as Senior Vice President, Operations and Corporate Development.
  • Karen Blasing sold 175,208 shares on February 8-27 pursuant to a Rule 10b5-1 trading plan. Karen Blasing currently holds 52,724 options or less than 0.1% of the company. Karen Blasing has served as Guidewire's Chief Financial Officer and Treasurer since 2009.
  • Neal Dempsey sold 720,728 shares on February 27-28 and currently controls 2,461,968 shares or 4.4% of the company. Neal Dempsey has served on the board of directors since 2006.
  • Jeremy Henrickson sold 3,000 shares on February 13 pursuant to a Rule 10b5-1 trading plan. Jeremy Henrickson currently holds 5,553 shares or less than 0.1% of the company. Jeremy Henrickson has served as Guidewire's Vice President of Product Development since 2008.
  • Kenneth Branson sold 25,000 shares on February 5 pursuant to a Rule 10b5-1 trading plan. Kenneth Branson currently holds 946,532 shares or 1.7% of the company. Kenneth Branson co-founded Guidewire and has served as Director of Product Strategy and on the board of directors since 2010.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
February 2013 986,486 0
January 2013 103,525 1,000
December 2012 354,647 0
November 2012 70,141 0
October 2012 68,500 0
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The month of February 2013 has seen the most insider selling since October 2012.

Financials

The company reported the second-quarter fiscal 2013, which ended January 31, financial results on February 26 with the following highlights:

Revenue $72.2 million
Net income $5.5 million
Cash $203.2 million
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Competition

Here is a table comparing Guidewire against the Business Software & Services industry.

Company GWRE Industry Average (Business Software & Services)
Market Cap: 2.00B 1.37B
Employees: 837 3.08K
Qtrly Rev Growth (yoy): 0.31 0.38
Revenue: 260.07M 359.03M
Gross Margin: 0.58 0.55
EBITDA: 18.73M 18.73M
Operating Margin: 0.06 0.09
Net Income: 13.22M N/A
EPS: 0.22 0.53
P/E: 163.05 45.80
PEG (5 yr expected): 6.35 1.34
P/S: 7.85 1.80
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Guidewire 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 four analyst buy ratings, three neutral ratings and zero sell ratings, with an average target price of $32.60. The stock is trading at a P/E ratio of 163.05 and a forward P/E ratio of 87.49. The company has a book value of $3.49 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The four main reasons for the proposed short entry are high P/S ratio, high P/E ratio, bearish analyst target prices and the intensive insider selling activity.

2. Trulia (TRLA) operates an online real estate site that provides clients with information about homes for sale, apartments for rent, neighborhood insights, and real estate markets and trends.

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Insider selling by insider (last 30 days)

  • Accel IX LP sold 432,668 shares on February 25-27 pursuant to a Rule 10b5-1 trading plan. Accel IX LP currently controls 3,764,276 shares or 13.9% of Trulia.
  • Fayez Sarofim Investment Partnership No. 5, L.P. sold 958,883 shares on February 22-28 and currently controls 2,876,561 shares or 10.6% of Trulia.
  • Sami Inkinen sold 150,000 shares on February 22 pursuant to a Rule 10b5-1 trading plan. Sami Inkinen currently holds 1,905,571 shares or 7.0% of the company. Sami Inkinen is a co-founder and a director of the company.
  • Gregory Waldorf sold 42,510 shares on February 22 pursuant to a Rule 10b5-1 trading plan. Gregory Waldorf currently controls 128,532 shares or 0.5% of the company. Gregory Waldorf serves as a director of the company.
  • Robert Moles sold 13,000 shares on February 22 pursuant to a Rule 10b5-1 trading plan. Robert Moles currently holds 113,175 shares or 0.4% of the company. Robert Moles serves as a director of the company.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
February 2013 1,597,061 0
January 2013 0 0
December 2012 0 0
November 2012 0 0
October 2012 0 0
September 2012 920,900 0
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The month of February 2013 has seen the most insider selling.

Financials

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

Revenue $68.1 million
Net loss $10.9 million
Cash $100.0 million
Debt $9.8 million
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Outlook

Trulia provided revenue and Adjusted EBITDA outlook for the first quarter of 2013 as follows:

  • Revenue is expected to be in the range of $20.8 to $21.2 million. This represents 71% to 74% year-over-year growth.
  • Adjusted EBITDA is expected to be in the range of $0.8 to $1.2 million. This represents 4% to 6% of revenue.

Competition

Trulia's competitors include Move (NASDAQ:MOVE) and Zillow (NASDAQ:Z). Here is a table comparing these companies.

Company TRLA MOVE Z
Market Cap: 742.78M 386.87M 1.55B
Employees: N/A 943 560
Qtrly Rev Growth (yoy): 0.75 0.12 0.73
Revenue: 68.08M 199.23M 116.85M
Gross Margin: 0.85 0.79 0.88
EBITDA: -5.93M 16.17M 12.37M
Operating Margin: -0.14 0.03 0.06
Net Income: -10.92M 4.68M 5.94M
EPS: -0.87 0.12 0.18
P/E: N/A 81.42 253.28
PEG (5 yr expected): 1.34 0.76 4.28
P/S: 9.57 1.94 12.48
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Trulia's valuation is in line with Zillow's valuation.

My analysis

The stock has a $9 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 forward P/E ratio of 36.73. The company has a book value of $3.16 per share. I believe there is an opportunity for a short entry with the $9 price target from the Point and Figure chart. I would place a stop loss at $38, which is the all time high. The three main reasons for the proposed short entry are negative earnings, bearish Point and Figure chart and the intensive insider selling activity.

3. Demandware (NYSE:DWRE) provides software-as-a-service e-commerce solutions that enable companies to design, implement, and manage their own customized e-commerce sites, including Websites, mobile applications, and other digital storefronts.

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Insider selling by insider (last 30 days)

  • Scott Dussault sold 11,000 shares on March 1 pursuant to a Rule 10b5-1 trading plan. Scott Dussault currently holds 88,138 shares or 0.3% of the company. Scott Dussault has served as Executive Vice President and Chief Financial Officer since December 2008.
  • Jeffrey Barnett sold 12,708 shares on March 1 pursuant to a Rule 10b5-1 trading plan. Jeffrey Barnett currently holds 107,907 shares or 0.4% of the company. Jeffrey Barnett has served as Chief Operating Officer since January 2013.
  • Thomas Ebling sold 75,000 shares on February 26-27 pursuant to a Rule 10b5-1 trading plan. Thomas Ebling currently holds 322,297 shares or 1.1% of the company. Thomas Ebling has served as President and Chief Executive Officer and a member of the board of directors since October 2009.
  • Stephan Schambach sold 71,002 shares on February 19 pursuant to a Rule 10b5-1 trading plan. Stephan Schambach currently holds 3,643,044 shares or 12.1% of the company. Stephan Schambach is the founder of Demandware and has served as the Chairman of the board of directors since the company's inception in February 2004.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
March 2013 23,708 0
February 2013 164,872 0
January 2013 60,564 0
December 2012 79,049 0
November 2012 781,775 0
October 2012 83,603 0
September 2012 0 0
August 2012 0 0
July 2012 0 0
June 2012 0 0
May 2012 0 0
April 2012 0 0
March 2012 0 0
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The month of February 2013 has been the second highest insider selling month since March 2012.

Financials

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

Revenue $79.5 million
Net loss $9.3 million
Cash $107.2 million
Debt $5.4 million
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Competition

Demandware's competitors include Digital River (NASDAQ:DRIV), eBay (NASDAQ:EBAY) and International Business Machines (NYSE:IBM). Here is a table comparing these companies.

 

 

 

 

Company DWRE DRIV EBAY IBM Industry Average (Application Software)
Market Cap: 785.38M 465.33M 71.18B 227.26B 482.57M
Employees: N/A 1,473 30,000 442,255 527.00
Qtrly Rev Growth (yoy): 0.41 -0.10 0.18 -0.01 0.26
Revenue: 79.47M 386.22M 14.07B 104.51B 117.79M
Gross Margin: 0.69 0.83 0.70 0.48 0.69
EBITDA: -3.72M 37.46M 4.12B 26.86B 16.49M
Operating Margin: -0.09 0.03 0.21 0.21 0.03
Net Income: -9.30M -195.87M 2.61B 16.60B N/A
EPS: -0.39 -5.90 1.99 14.37 0.12
P/E: N/A N/A 27.59 14.12 37.25
PEG (5 yr expected): -2.26 1.98 1.38 1.23 1.42
P/S: 9.90 1.21 5.04 2.15 3.20
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Demandware is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

The stock has a $18 price target from the Point and Figure chart. There have been four insider sell transactions and there have not been any insider buy transactions during the last 30 days. The company has a book value of $2.99 per share. I believe there is an opportunity for a short entry with the $18 price target from the Point and Figure chart. I would place a stop loss at $34, which is the all time high. The three main reasons for the proposed short entry are negative earnings, bearish Point and Figure chart and the intensive insider selling activity.

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