Seeking Alpha
Long/short equity, insider ownership
Profile| Send Message|
( followers)  

There was intensive insider selling in Millennial Media (MM) in October, 2012. The stock has been trending down since the intensive insider selling took place and is currently trading 50% below the October peak.

(click to enlarge)

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. Innospec (IOSP) develops, manufactures, blends, and markets fuel additives, personal care and fragrance products, and other specialty chemicals to oil refineries, personal care and fragrance companies, and other chemical and industrial companies worldwide.

(click to enlarge)

Insider selling by insider (last 30 days)

  • Ian McRobbie sold 4,026 shares on February 26 - March 6, and currently holds 59,186 shares or 0.3% of the company. Ian McRobbie is Senior Vice President and Chief Technology Officer.
  • Brian Watt sold 1,860 shares on February 26, and currently holds 14,347 shares or less than 0.1% of the company. Brian Watt is Vice President, Strategic Planning and Regulatory Affairs.
  • Patrick Williams sold 27,765 shares on February 19-21, and currently holds 179,447 shares or 0.8% of the company. Patrick Williams is President and Chief Executive Officer.
  • Catherine Hessner sold 1,994 shares on February 19-26, and currently holds 33,237 shares or 0.1% of the company. Catherine Hessner is Senior Vice President Human Resources.
  • Ian Cleminson sold 17,879 shares on February 19-26, and currently holds 24,589 shares or 0.1% of the company. Ian Cleminson serves as Executive Vice President and Chief Financial Officer.
  • Mark Bracewell sold 1,260 shares on February 15, and currently holds 2,389 shares or less than 0.1% of the company. Mark Bracewell is Group Financial Controller.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
March 20132,8860
February 201351,8980
January 201300
December 201200
November 201200
October 201200
September 201200
August 201216,4640
July 201200
June 201200
May 2012160,6370
April 201200
March 201200
February 201200

The month of February 2013 has seen the most insider selling since May 2012.

Financials

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

Revenue$776.4 million
Net income$68.3 million
Cash$27.5 million
Debt$30.0 million

Competition

Innospec's competitors include BASF (OTCQX:BASFY) and NewMarket Corporation (NEU). Here is a table comparing these companies.

CompanyIOSPBASFYNEUIndustry Average (Specialty Chemicals)
Market Cap:981.11M88.56B3.48B5.56B
Employees:900107,7751,7106.80K
Qtrly Rev Growth (yoy):0.070.090.020.09
Revenue:776.40M101.93B2.22B2.63B
Gross Margin:0.310.260.290.34
EBITDA:114.80M16.25B407.77M354.00M
Operating Margin:0.130.120.160.11
Net Income:68.30M6.32B239.28MN/A
EPS:2.866.8817.851.01
P/E:14.7014.0214.5321.22
PEG (5 yr expected):1.003.481.261.97
P/S:1.260.871.571.39

Innospec's P/S ratio is in line with the industry average.

My analysis

There have been 11 insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are two analyst buy ratings, zero neutral ratings and zero sell ratings, with an average target price of $40.67. The stock is trading at a P/E ratio of 14.70 and a forward P/E ratio of 10.87. The company has a book value of $13.58 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 bearish analyst target prices and the intensive insider selling activity.

2. Cigna Corporation (CI), a health services organization, provides insurance and related products and services in the United States and internationally.

(click to enlarge)

Insider selling by insider (last 30 days)

  • William Zollars sold 854 shares on March 5, and currently holds 769 shares or less than 0.1% of the company. William Zollars has been a Director of Cigna since 2005.
  • Jane Henney sold 1,837 shares on March 5, and currently holds 769 shares or less than 0.1% of the company. Jane Henney has been a Director of Cigna since 2004.
  • Matthew Manders sold 14,733 shares on March 5, and currently holds 50,750 shares or less than 0.1% of the company. Matthew Manders is President of Regional and Operations.
  • David Cordani sold 49,650 shares on March 6, pursuant to a Rule 10b5-1 trading plan. David Cordani currently holds 50,750 shares or less than 0.1% of the company. David Cordani became President and Chief Executive Officer of Cigna Corporation in December 2009.
  • John Murabito sold 61,237 shares on March 5-6, and currently holds 119,573 shares or less than 0.1% of the company. John Murabito is Executive Vice President, Human Resources and Services.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
March 2013128,3110
February 201300
January 20136,2500
December 201200
November 201200
October 201218,9660
September 201215,5550

The month of March 2013 has seen the most insider selling.

Financials

The company reported the full year 2012 financial results on February 7, with the following highlights:

Revenue$29.1 billion
Net income$1.6 billion
Cash$3.1 billion
Debt$5.2 billion

Outlook

Cigna's outlook for full year 2013 consolidated adjusted income from operations is in the range of $1.70 billion to $1.83 billion, or $5.85 to $6.30 per share.

Competition

Cigna's competitors include Aetna (AET), UnitedHealth Group (UNH) and WellPoint (WLP). Here is a table comparing these companies.

CompanyCIAETUNHWLPIndustry Average (Health Care Plans)
Market Cap:16.85B16.27B55.14B19.06B17.01B
Employees:35,80035,000133,00043,50030.22K
Qtrly Rev Growth (yoy):0.410.160.110.010.09
Revenue:29.12B36.60B110.62B61.71B29.12B
Gross Margin:0.390.270.270.220.15
EBITDA:3.22B3.52B10.15B5.39B3.22B
Operating Margin:0.100.080.080.080.04
Net Income:1.62B1.66B5.53B2.66BN/A
EPS:5.614.815.288.181.75
P/E:10.5110.3110.197.6733.18
PEG (5 yr expected):0.941.150.880.661.45
P/S:0.580.440.500.310.51

Cigna's P/S ratio is in line with the industry average.

My analysis

There have been five insider sell transactions and there have not been any insider buy transactions during the last 30 days. There are nine analyst buy ratings, three neutral ratings and zero sell ratings, with an average target price of $56.50. The stock is trading at a P/E ratio of 10.51 and a forward P/E ratio of 8.52. The company has a book value of $34.18 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 bearish analyst target prices and the intensive insider selling activity.

3. Newport Corporation (NEWP) and its subsidiaries provide technology products and systems to scientific research, microelectronics, aerospace and defense/security, life and health sciences, and industrial markets in the United States, Europe, and the Pacific Rim.

(click to enlarge)

Insider selling by insider (last 30 days)

  • Charles Cargile sold 23,200 shares on February 26 - March 5, and currently holds 97,970 shares or 0.3% of the company. Charles Cargile is Senior Vice President and Chief Financial Officer.
  • Robert Phillippy sold 17,567 shares on February 12, pursuant to a Rule 10b5-1 trading plan. Robert Phillippy currently holds 169,471 shares or 0.4% of the company. Robert Phillippy is President & CEO of the company.
  • Jeffrey Coyne sold 8,000 shares on February 12, pursuant to a Rule 10b5-1 trading plan. Jeffrey Coyne currently holds 58,166 shares or 0.2% of the company. Jeffrey Coyne is Senior Vice President, General Counsel & Secretary.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
March 201313,2000
February 201389,5000
January 201324,9500
December 201274,7490
November 201200
October 201200
September 201200
August 201200
July 201200
June 2012020,000
May 201200
April 201200
March 201219,9600
February 201277,8240

The month of February 2013 has seen the most insider selling since February 2012.

Financials

The company reported the full-year 2012 financial results on February 20 with the following highlights:

Revenue$595.3 million
Net loss$91.0 million
Cash$100.4 million
Debt$183.7 million

Outlook

Robert Phillippy, Newport's President and Chief Executive Officer, commented Newport's outlook for 2013 on February 20:

Over the past year we have integrated our recent acquisitions, improved operational efficiencies and increased our cash generation despite very challenging market conditions. Based on the input we have received from our customers, we expect market conditions to improve during the course of 2013 and our sales to increase in the second half of the year. However, we have not yet seen a meaningful increase in order activity, and based on our current backlog we expect our net sales in the first quarter of 2013 to be slightly lower on a sequential basis. Additionally, we expect our non-GAAP operating income and non-GAAP earnings per diluted share to decline sequentially in the first quarter, due to an increase in our operating expenses resulting from the seasonal nature of some expenses and continued investment to fund our growth initiatives. We expect the benefit of these investments, coupled with improved market conditions, to position us well to deliver solid financial results in 2013 and beyond.

Competition

Newport's competitors include Agilent Technologies (A) and Corning (GLW). Here is a table comparing these companies.

CompanyNEWPAGLWIndustry Average (Industrial Equipment Wholesale)
Market Cap:636.05M15.01B18.64B4.42B
Employees:N/A20,50028,700N/A
Qtrly Rev Growth (yoy):-0.120.030.140.00
Revenue:595.35M6.90B8.01B6.62B
Gross Margin :0.440.520.420.37
EBITDA :91.58M1.40B2.49B681.79M
Operating Margin :0.080.160.190.14
Net Income :-89.42M1.10B1.73BN/A
EPS :-2.353.131.151.96
P/E :N/A13.8211.0113.12
PEG (5 yr expected):1.561.730.890.67
P/S :1.072.172.331.66

Newport 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 forward P/E ratio of 12.12. The company has a book value of $10.41 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 weak first-quarter outlook and the intensive insider selling activity.

Source: 3 Stocks With Recent Intensive Insider Selling