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There was intensive insider selling in Select Comfort (SCSS) in August 2012 and November 2012. The stock peaked at $34.38 on September 14, 2012 and is currently trading at $19.08 or 44.5% below the highs.


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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. Corrections Corporation of America (CXW) owns and operates privatized correctional and detention facilities in the United States.


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Insider selling by insider (last 30 days)

  • John Ferguson sold 111,835 shares on February 25 - March 18 and currently controls 187,758 shares or 0.2% of the company. John Ferguson began serving as Chairman of the Board and Chief Executive Officer in July 2008 after serving as President and CEO of Corrections Corporation of America since August 2000.
  • John Prann sold 7,900 shares on February 28 - March 18 and currently controls 22,270 shares or less than 0.1% of the company. John Prann has served as a director since December 2001.
  • Anthony Grande sold 15,000 shares on March 18 and currently holds 84,138 shares or less than 0.1% of the company. Anthony Grande assumed the role of Executive Vice President and Chief Development Officer in July 2008.
  • Brian Collins sold 30,000 shares on March 18 and currently holds 44,926 shares or less than 0.1% of the company. Brian Collins was named Executive Vice President and Chief Human Resources Officer in September 2009.
  • John Horne sold 37,459 shares on March 5 and currently holds 62,274 shares or less than 0.1% of the company. John Horne has served as a director since December 2001.
  • Steve Groom sold 93,507 shares on February 25 - March 4 and currently holds 47,451 shares or less than 0.1% of the company. Steve Groom was named Executive Vice President and General Counsel in April 2010.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
March 2013 163,766 0
February 2013 259,273 0
January 2013 0 0
December 2012 1,000 0
November 2012 3,000 0
October 2012 3,000 0

The insider selling has picked up in February 2013.

Financials

The company reported the full year 2012 financial results on February 13 with the following highlights:

Revenue $1.8 billion
Net income $156.8 million
Cash $62.9 million
Debt $1.1 billion

Outlook

The company expects adjusted diluted EPS for the first quarter of 2013 to be in the range of $0.47 to $0.48, and full-year 2013 to be in the range of $2.05 to $2.15. The company also expects FFO for the first quarter of 2013 to be in the range of $0.66 to $0.68 per diluted share and full-year 2013 to be in the range of $2.80 to $2.90. AFFO per diluted share for the first quarter of 2013 is expected to be in the range of $0.64 to $0.66 and $2.72 to $2.87 for the full-year 2013.

Competition

Corrections Corporation of America's competitors include Avalon Correctional Services (CITY.PK) and The GEO Group (GEO). Here is a table comparing these companies.

Company CXW CITY.PK GEO Industry Average (Management Services)
Market Cap: 3.88B 14.00M 2.57B 665.75M
Employees: 17,000 N/A 18,733 2.80K
Qtrly Rev Growth (yoy): -0.00 0.15 0.08 0.13
Revenue: 1.76B 28.64M 1.48B 743.38M
Gross Margin: 0.29 0.31 0.26 0.34
EBITDA: 418.77M 4.87M 276.04M 111.16M
Operating Margin: 0.17 0.11 0.12 0.15
Net Income: 157.12M 1.12M 145.41M N/A
EPS: 1.56 0.26 2.20 0.90
P/E: 24.86 16.47 16.55 14.56
PEG (5 yr expected): 1.40 N/A 1.50 1.03
P/S: 2.20 0.49 1.74 0.90

Corrections Corporation of America 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. The stock is trading at a P/E ratio of 24.86 and a forward P/E ratio of 18.78. The company has a book value of $15.20 per share and the stock has a dividend yield of 2.07%. 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 relatively high P/S ratio and the intensive insider selling activity.

2. Pacira Pharmaceuticals (PCRX), a specialty pharmaceutical company, develops, commercializes, and manufactures pharmaceutical products for use in hospitals and ambulatory surgery centers worldwide.


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Insider selling by insider (last 30 days)

  • HBM BioVentures Cayman Ltd sold 909,100 shares on March 11-19 and currently holds 2,524,893 shares or 7.7% of Pacira.
  • Sanderling Venture Partners VI LP sold 624,511 shares on March 7-18 and currently holds 416,083 shares or 1.3% of Pacira.
  • Luke Evnin sold 1,000,000 shares on March 11-18 by MPM Bioventures IV Qp LP. MPM Bioventures IV Qp LP currently controls 2,290,479 shares or 7.0% of Pacira. Luke Evnin serves as a director of Pacira and is managing director of MPM Capital.
  • Lauren Riker sold 10,000 shares on March 14 and currently holds 2,000 shares or less than 0.1% of the company. Lauren Riker is Executive Director, Accounting.
  • John Pratt sold 9,375 shares on March 12 and currently holds 20,625 options or less than 0.1% of the company. John Pratt joined Pacira as General Manager of its San Diego facility in January 2012.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
March 2013 2,552,986 0
February 2013 0 0
January 2013 500,000 0
December 2012 0 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 0 0
April 2012 0 10,000
March 2012 100,000 0

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

Financials

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

Revenue $39.1 million
Net loss $52.3 million
Cash $42.6 million
Debt $26.0 million

On January 23, 2013, the company completed an offering of $120.0 million of 3.25 percent convertible senior notes, providing net proceeds of approximately $115.3 million after deducting offering expenses.

Outlook

The company expects to be cash flow positive at some point in 2014 and does not need to raise more capital.

Competition

Pacira's marketed product Exparel is competing with elastomeric pump/catheter devices intended to provide bupivacaine over several days. I-FLOW Corporation (acquired by Kimberly-Clark Corporation (KMB) in 2009) has marketed these medical devices in the United States since 2004. In addition, the company anticipates Exparel will compete with currently marketed bupivacaine and opioid analgesics such as morphine.

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 five analyst buy ratings, zero neutral ratings and zero sell ratings, with an average target price of $19.00. The stock is trading at a forward P/E ratio of 32.43 and the company has a book value of $2.02 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. Endurance Specialty Holdings (ENH) underwrites specialty lines of personal and commercial property and casualty insurance and reinsurance worldwide.


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Insider selling by insider (last 30 days)

  • John O'Connor sold 10,000 shares on March 20 and currently holds 54,466 shares or 0.1% of the company. John O'Connor was appointed Endurance's Chief Operations Officer in December 2012.
  • Catherine Kalaydjian sold 15,919 shares on March 14 and currently holds 31,980 shares or less than 0.1% of the company. Catherine Kalaydjian is Chief Claims Officer & Chief Administrative Officer.
  • Carrie Rosorea sold 767 shares on March 15 and currently holds 7,325 shares or less than 0.1% of the company. Carrie Rosorea is Chief Accounting Officer.
  • Joan deLemps sold 4,710 shares on March 1 and currently holds 42,076 shares or 0.1% of the company. Joan deLemps is Chief Underwriting Officer.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
March 2013 31,396 0
February 2013 0 0
January 2013 0 0
December 2012 14,648 73
November 2012 25,000 0
October 2012 0 0
September 2012 0 50
August 2012 0 7,000
July 2012 0 0
June 2012 0 56
May 2012 0 0
April 2012 0 0
March 2012 38,292 0

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

Financials

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

Revenue $2.3 billion
Net income $129.8 million
Cash $1.2 billion
Debt $527.3 million
Book value $52.88 per share

Competition

Endurance's competitors include ACE Limited (ACE) and American International Group (AIG). Here is a table comparing these companies.

Company ENH ACE AIG Industry Average (Property & Casualty Insurance)
Market Cap: 2.03B 29.97B 55.79B 4.03B
Employees: 881 17,000 63,000 2.20K
Qtrly Rev Growth (yoy): 0.12 0.03 0.09 0.03
Revenue: 2.26B 17.94B 65.66B 2.50B
Gross Margin: 0.19 0.30 0.22 0.30
EBITDA: 208.80M 3.21B 16.97B 424.06M
Operating Margin: 0.08 0.18 0.18 0.06
Net Income: 127.65M 2.71B 7.49B N/A
EPS: 3.00 7.89 2.04 2.57
P/E: 15.68 11.19 18.54 18.04
PEG (5 yr expected): 1.22 1.68 0.91 1.44
P/S: 0.90 1.67 0.85 1.62

Endurance 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. There is one analyst buy rating, one neutral rating and zero sell ratings, with an average target price of $40.50. The stock is trading at a P/E ratio of 15.68 and a forward P/E ratio of 10.13. The company has a book value of $52.88 per share and the stock has a dividend yield of 2.72%. 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.

Source: 1 Prison, 1 Pharmaceutical And 1 Insurance Company With Recent Intensive Insider Selling