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

There was intensive insider selling in Intuitive Surgical (NASDAQ:ISRG) in January this year. Intuitive Surgical plunged more than 14%, or $81.09 a share, on February 28, just as a news report circulated saying the company's devices were under federal scrutiny.

(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. Rock-Tenn Company (NYSE:RKT) manufactures and sells corrugated and consumer packaging products in the United States, Canada, Mexico, Chile, Argentina, Puerto Rico, and China.

(click to enlarge)

Insider selling by insider (last 30 days)

  • Steve Meadows sold 3,000 shares on March 8 and currently holds 29,385 shares or less than 0.1% of the company. Steve Meadows joined RockTenn in 2006 as Chief Accounting Officer.
  • Robert McIntosh sold 14,500 shares on March 1 and currently holds 82,870 shares or 0.1% of the company. Robert McIntosh has served as RockTenn's Executive Vice President, General Counsel and Secretary since 2009.
  • Russell Currey sold 20,000 shares on February 19-28 and currently controls 183,528 shares or 0.3% of the company. Russell Currey serves as a director of the company.
  • John Spiegel sold 14,477 shares on February 28 and currently controls 30,952 shares or less than 0.1% of the company. John Spiegel serves as a director of the company.

Insider selling by calendar month

Here is a table of Rock-Tenn's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
March 201317,5000
February 201385,4770
January 201335,6080
December 20122,4420
November 201200
October 201200
September 201200
August 201200
July 201200
June 201200
May 201240,0000
April 201200
March 201200
February 201200

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

Financials

The company reported the first-quarter fiscal 2013, which ended December 31, financial results on January 22 with the following highlights:

Revenue$2.3 billion
Net income$86.0 million
Cash$31.0 million
Debt$3.3 billion

Competition

Rock-Tenn's competitors include Clearwater Paper (NYSE:CLW) and International Paper (NYSE:IP). Here is a table comparing these companies.

CompanyRKTCLWIPIndustry Average (Packaging & Containers)
Market Cap:6.39B1.14B20.74B349.49M
Employees:26,3003,86070,0002.38K
Qtrly Rev Growth (yoy):0.01-0.010.110.08
Revenue:9.23B1.87B27.83B1.06B
Gross Margin:0.170.140.260.22
EBITDA:1.15B226.74M3.53B97.35M
Operating Margin:0.070.080.070.07
Net Income:258.00M64.13M749.00MN/A
EPS:3.572.721.800.54
P/E:25.1218.2826.0812.21
PEG (5 yr expected):0.861.420.511.24
P/S:0.690.610.750.48

Rock-Tenn 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 25.12 and a forward P/E ratio of 10.62. The company has a book value of $48.31 per share and the stock has a dividend yield of 1.00%. 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.

2. Weyco Group (NASDAQ:WEYS) engages in the wholesale distribution and retail of footwear in North America, Australia, South Africa, the Asia Pacific, and Europe.

(click to enlarge)

Insider selling by insider (last 30 days)

  • John Wittkowske sold 37,500 shares on March 11 and currently holds 79,525 shares or 0.7% of the company. John Wittkowske is Senior Vice President, Chief Financial Officer and Secretary.
  • Thomas Florsheim sold 26,050 shares on March 11 and currently holds 522,460 shares or 4.8% of the company. Thomas Florsheim is Chairman and Chief Executive Officer.
  • John Florsheim sold 26,050 shareson March 11 and currently holds 314,106 shares or 2.9% of the company. John Florsheim is President, Chief Operating Officer and Assistant Secretary.
  • Judy Anderson sold 7,500 shares on March 11 and currently holds 3,895 shares or less than 0.1% of the company. Judy Anderson is Vice President, Finance and Treasurer.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
March 201397,1000
February 201300
January 201300
December 201200
November 20123,6000
October 201200
September 20129,5600
August 201200
July 201200
June 20125,0000
May 2012101,0560
April 201200
March 201200
February 201200

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

Financials

The company reported the full year 2012 financial results on February 28 with the following highlights:

Revenue$293.5 million
Net income$19.0 million
Cash$25.3 million
Debt$45.0 million

Competition

Weyco's competitors include Brown Shoe (NYSE:BWS) and PVH Corp. (NYSE:PVH). Here is a table comparing these companies.

CompanyWEYSBWSPVHIndustry Average (Textile - Apparel Footwear & Accessories)
Market Cap:261.91M753.61M8.54B552.57M
Employees:N/A15,30010,9001.80K
Qtrly Rev Growth (yoy):0.050.03-0.010.09
Revenue:293.47M2.59B5.94B807.61M
Gross Margin:0.390.390.530.38
EBITDA:33.44M135.25M778.83M64.11M
Operating Margin:0.100.040.110.06
Net Income:18.96M15.67M410.51MN/A
EPS:1.730.355.810.76
P/E:14.0249.9120.8215.42
PEG (5 yr expected):N/A1.081.721.05
P/S:0.890.291.440.90

Weyco's valuation is in line with the industry average.

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 14.02. The company has a book value of $15.72 per share and the stock has a dividend yield of 2.80%. 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.

3. Insteel Industries (NASDAQ:IIIN) manufactures and markets steel wire reinforcing products for concrete construction applications.

(click to enlarge)

Insider selling by insider (last 30 days)

  • H.O. Woltz III sold 100,537 shares on February 20 - March 8 and currently holds 477,422 shares or 2.7% of the company. H.O. Woltz III is Chairman, President and CEO of the company.
  • Allen Rogers sold 3,000 shares on March 8 and currently holds 69,583 shares or 0.4% of the company. Allen Rogers serves as a director of the company.
  • James Petelle sold 3,300 shares on February 19 - March 5 and currently holds 6,601 shares or less than 0.1% of the company. James Petelle joined the company on October 2006 and was elected Vice President and Assistant Secretary of the company in November 2006 and Vice President - Administration and Secretary in January 2007.
  • Gary Pechota sold 4,000 shares on February 22 and currently holds 47,146 shares or 0.3% of the company. Gary Pechota serves as a director of the company.
  • Richard Wagner sold 45,455 shares on February 19 and currently holds 32,217 shares or 0.2% of the company. Richard Wagner joined the company in 1992 and has served as Vice President and General Manager of the Concrete Reinforcing Products Business Unit of the company's subsidiary, Insteel Wire Products Company, since 1998.

Insider selling by calendar month

Here is a table of Insteel Industries' insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
March 201397,2680
February 201360,8210
January 20133,9140
December 201200
November 201200
October 201200
September 201200
August 201200
July 201200
June 201200
May 201200
April 201200
March 201200
February 20121,2000

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

Financials

The company reported the first-quarter fiscal 2013, which ended December 29, 2012, financial results on January 17 with the following highlights:

Revenue$85.9 million
Net income$2.4 million
Cash$4.8 million

Outlook

H.O. Woltz III commented on January 17:

"Market conditions for the first quarter were stronger than anticipated during what is typically our weakest period of the year due to the seasonal downturn in construction activity. We are encouraged by the ongoing recovery in the housing market, which may improve the prospects for a broader upturn in nonresidential construction activity and demand for our products. Our outlook for the remainder of the year, however, remains cautious in view of the high degree of economic uncertainty. Nevertheless, we expect that our results will be favorably impacted by the recently completed reconfiguration of our welded wire reinforcement operations and the ramp up of our engineered structural mesh expansion."

Competition

Insteel Industries' competitors include Keystone Consolidated Industries (OTC:KYCN) and Nucor (NYSE:NUE). Here is a table comparing these companies.

CompanyIIINKYCNNUEIndustry Average (Steel & Iron)
Market Cap:288.00M90.76M15.24B1.43B
Employees:6821,02422,2001.58K
Qtrly Rev Growth (yoy):0.01-0.06-0.080.15
Revenue:364.38M572.01M19.43B6.37B
Gross Margin:0.070.080.080.16
EBITDA:16.92M54.02M1.71B265.77M
Operating Margin:0.020.070.060.05
Net Income:4.39M25.18M502.91MN/A
EPS:0.242.081.580.52
P/E:67.913.6030.3710.56
PEG (5 yr expected):0.67N/A2.460.74
P/S:0.790.160.780.37

Insteel Industries is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been 10 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 67.91 and a forward P/E ratio of 13.79. The company has a book value of $8.30 per share and the stock has a dividend yield of 0.74%. 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.

Source: 3 Stocks With Recent Intensive Insider Selling