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The technology sector has been the worst-performing group over the recent six-month period with a loss of 1.1%.


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For this article, I screened for technology stocks that 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. Salesforce.com (CRM) provides cloud computing and social enterprise solutions to various businesses and industries worldwide.


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Insider selling by insider (last 30 days)

  • Maria Martinez sold 8,225 shares on March 18-25 and currently holds 27,126 options or less than 0.1% of the company. Maria Martinez is Executive Vice President, Customers for Life and Chief Growth Officer.
  • Frank van Veenendaal sold 18,360 shares on February 28 - March 25 pursuant to a 10b5-1 plan. Frank van Veenendaal currently holds 3,878 shares or less than 0.1% of the company. Frank van Veenendaal is vice chairman of salesforce.com and leads the global sales, customer support, and consulting services organizations.
  • Parker Harris sold 10,919 shares on March 5-19 pursuant to a 10b5-1 plan. Parker Harris currently holds 35,822 shares or less than 0.1% of the company. Parker Harris founded salesforce.com along with Marc Benioff, Dave Moellenhoff and Frank Dominguez in the spring of 1999. As executive vice president, Harris oversees the development of all software for salesforce.com.
  • Graham Smith sold 1,400 shares on March 15 pursuant to a 10b5-1 plan. Graham Smith currently holds 20,342 shares or less than 0.1% of the company. Graham Smith is Executive Vice President and Chief Financial Officer of the company.
  • Stratton Sclavos sold 800 shares on March 5 and currently holds 3,200 shares or less than 0.1% of the company. Stratton Sclavos serves as a director of the company.
  • Hilarie Koplow sold 5,577 shares on March 1-5 pursuant to a 10b5-1 plan. Hilarie Koplow currently holds 23,288 shares or less than 0.1% of the company. Hilarie Koplow leads salesforce.com's worldwide sales teams, focusing on growing the company's business globally.
  • Blair Crump sold 762 shares on March 1 and currently holds 2,678 shares or less than 0.1% of the company. Blair Crump is president of salesforce.com's global enterprise business unit.
  • Craig Conway sold 500 shares on March 1 pursuant to a 10b5-1 plan. Craig Conway currently holds 5,764 shares or less than 0.1% of the company. Craig Conway serves as a director of the company.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
March 2013 45,315 0
February 2013 36,205 0
January 2013 60,895 0

There have been 142,415 shares sold and zero shares purchased since January 2013.

Financials

The company reported the full fiscal year 2013, which ended January 31, financial results on February 28 with the following highlights:

Revenue $3.1 billion
Net loss $270.4 million
Cash $867.6 million
Debt $647.9 million

Outlook

Q1 FY14 Guidance: Revenue for the company's first fiscal quarter is projected to be in the range of $882 million to $887 million, an increase of 27% to 28% year-over-year. GAAP net loss per share is expected to be in the range of ($0.44) to ($0.42), while diluted non-GAAP EPS is expected to be in the range of $0.40 to $0.42.

Full Year FY14 Guidance: Revenue for the company's full fiscal year 2014 is projected to be in the range of $3.82 billion to $3.87 billion, an increase of 25% to 27% year-over-year. For the company's full fiscal year 2014, GAAP net loss per share is expected to be in the range of ($1.22) to ($1.18) while diluted non-GAAP EPS is expected to be in the range of $1.93 to $1.97.

Competition

Salesforce.com's competitors include Oracle Corporation (ORCL) and SAP AG (SAP). Here is a table comparing these companies.

Company CRM ORCL SAP
Market Cap: 25.43B 150.51B 94.02B
Employees: 9,800 115,000 64,422
Qtrly Rev Growth (yoy): 0.32 -0.01 0.12
Revenue: 3.05B 37.15B 21.00B
Gross Margin: 0.78 0.80 0.71
EBITDA: 83.99M 17.29B 7.09B
Operating Margin: -0.04 0.39 0.28
Net Income: -270.45M 10.57B 3.65B
EPS: -1.92 2.15 3.07
P/E: N/A 14.87 25.74
PEG (5 yr expected): 2.96 1.25 1.63
P/S: 8.33 4.00 4.55

Salesforce.com has the highest P/S ratio among these three companies.

My analysis

There have been 21 insider sell transactions and there have not been any insider buy transactions during the last 30 days. The stock is currently trading at a forward P/E ratio of 68.88 and the company has a book value of $15.83 per share. 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 negative earnings, high P/S ratio and the intensive insider selling activity.

2. FAB Universal Corporation (FU) provides podcast hosting, distribution, audience analysis, advertising, content subscriptions, and App sales for podcast producers worldwide.


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Insider selling by insider (last 30 days)

  • Christopher Spencer sold 45,830 shares on March 26 and currently holds 379,642 shares or 1.8% of the company. Christopher Spencer is the CEO and President of the company.
  • Denis Yevstifeyev sold 52,665 shares on March 14-22 and currently holds 35,000 shares or 0.2% of the company. Denis Yevstifeyev serves as a director of the company.
  • John Busshaus sold 28,766 shares on March 1-11 and currently holds 287,652 shares or 1.4% of the company. John Busshaus is Chief Financial Officer of the company.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
March 2013 127,261 0
February 2013 126,276 0
January 2013 52,325 0

There have been 305,862 shares sold and zero shares purchased since January 2013.

Financials

The company reported the full-year 2012 financial results on March 18 with the following highlights:

Revenue $27.5 million
Net loss $4.0 million
Cash $19.7 million

Outlook

FAB Universal expects to generate approximately between $23.1 million and $23.8 million in revenue in the first quarter of 2013 and between $98.9 million and $102.6 million for the full year 2013. The company expects after tax net income between $4.1 million and $4.4 million for the first quarter of 2013 and between $19.3 million and $20.1 million for the full year 2013.

Competition

There are many companies that distribute online content targeting Chinese Internet users. FAB Universal competes with distributors of content over the Internet, including content sites, Web directories, search engines and Internet service providers. These sites compete with FAB Universal for customers and advertising dollars. The Internet market in China is relatively new and rapidly evolving. Competition is intense and expected to increase significantly in the future, because there are no substantial barriers to entry in the market.

My analysis

There have been six insider sell transactions and there have not been any insider buy transactions during the last 30 days. The company has a book value of $6.38 per share. I am not recommending to short this stock below the book value.

3. MedAssets (MDAS), a financial and performance improvement company, provides technology-enabled products and services for hospitals, health systems, and other ancillary healthcare providers in the United States.


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Insider selling by insider (last 30 days)

  • Charles Garner sold 23,490 shares on March 4-22 pursuant to a Rule 10b5-1 trading plan. Charles Garner currently holds 121,082 restricted shares or 0.2% of the company. Charles Garner is MedAssets' Executive Vice President and Chief Financial Officer.
  • Michael Nolte sold 778 shares on March 22-26 pursuant to a Rule 10b5-1 trading plan. Michael Nolte currently holds 46,903 shares or less than 0.1% of the company. Michael Nolte joined MedAssets as Chief Operating Officer in March 2012.
  • John Rutherford sold 25,000 shares on March 5 and currently holds 92,832 shares or 0.2% of the company. John Rutherford has served as one of the directors since August of 1999.
  • Gregory Strobel sold 13,286 shares on March 1-5 and currently holds 11,871 restricted shares or less than 0.1% of the company. Gregory Strobel is President of MedAssets Revenue Cycle Management Segment.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
March 2013 62,554 0
February 2013 18,349 0
January 2013 77,077 0

There have been 157,980 shares sold and zero shares purchased since January 2013.

Financials

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

Revenue $640.1 million
Net loss $6.9 million
Net debt $871.3 million

Outlook

On February 20, MedAssets introduced full-year 2013 financial guidance, as follows:

Revenue $670.0 - $684.0 million
GAAP EPS $0.33 - $0.43
Non-GAAP Adjusted EPS $1.22 - $1.32

Competition

MedAssets' competitors include McKesson Corporation (MCK). Here is a table comparing these two companies.

Company MDAS MCK
Market Cap: 1.14B 25.12B
Employees: 3,100 37,700
Qtrly Rev Growth (yoy): 0.05 0.01
Revenue: 640.12M 123.53B
Gross Margin: 0.78 0.06
EBITDA: 194.95M 2.85B
Operating Margin: 0.14 0.02
Net Income: -6.88M 1.60B
EPS: -0.12 6.60
P/E: N/A 16.35
PEG (5 yr expected): 1.26 1.14
P/S: 1.79 0.20

MedAssets is trading at a higher P/S ratio than McKesson.

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 11 analyst buy ratings, 12 neutral ratings and one sell rating, with an average target price of $15.25. The stock is currently trading at a forward P/E ratio of 13.14 and the company has a book value of $7.30 per share. 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.

Source: 2 Software Companies And A Healthcare Information Services Provider With Recent Intensive Insider Selling