1 Software, 1 Biotech And 1 Identification Solutions Company With Recent Intensive Insider Selling

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 |  Includes: ADBE, BRC, FLDM
by: Markus Aarnio

The technology sector has been the worst-performing group over the one year period with a loss of 1.0%.

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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. Fluidigm Corporation (NASDAQ:FLDM) develops, manufactures, and markets microfluidic systems for academic research institutions, clinical laboratories, pharmaceutical companies, and biotechnology and Ag-Bio companies.

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Insider selling by insider (last 30 days)

  • Gajus Worthington sold 10,000 shares on April 1 pursuant to a Rule 10b5-1 trading plan. Gajus Worthington currently controls 185,159 shares or 0.7% of the company. Gajus Worthington is a Co-Founder of Fluidigm Corporation and has served as President and Chief Executive Officer and a Director since the company's inception in June 1999.
  • William Smith sold 5,000 shares on April 1 pursuant to a Rule 10b5-1 trading plan. William Smith currently holds 2,510 options or less than 0.1% of the company. William Smith has served as Executive Vice President, Legal Affairs since January 2012.
  • Robert Jones sold 7,000 shares on March 18-28 pursuant to a Rule 10b5-1 trading plan. Robert Jones currently holds 10,319 options or less than 0.1% of the company. Robert Jones has served as Executive Vice President, Research and Development since August 2005.
  • Vikram Jog sold 5,661 shares on March 18-28 pursuant to a Rule 10b5-1 trading plan. Vikram Jog currently holds 2,487 options or less than 0.1% of the company. Vikram Jog has served as Chief Financial Officer since February 2008.
  • Mai Yow sold 30,000 shares on March 4 pursuant to a Rule 10b5-1 trading plan. Mai Yow currently holds 573 options or less than 0.1% of the company. Mai Yow has served as Executive Vice President, Worldwide Manufacturing of Fluidigm Singapore Pte. Ltd., the company's Singapore subsidiary, since January 2012.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 15,000 0
March 2013 62,661 0
February 2013 33,306 0
January 2013 51,122 0
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There have been 162,089 shares sold and zero shares purchased this year.

Financials

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

Revenue $52.3 million
Net loss $19.0 million
Cash $80.0 million
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Outlook

The company is projecting 2013 total revenue growth guidance to be 22%-26% over 2012. Historically, Fluidigm's product revenues have tended to be lowest in the first quarter of the year and highest in the fourth quarter of the year. Fluidigm expects this trend to continue in 2013.

Competition

Fluidigm's competitors include Affymetrix (NASDAQ:AFFX), Illumina (NASDAQ:ILMN) and Life Technologies Corporation (NASDAQ:LIFE). Here is a table comparing these companies.

Company

FLDM AFFX ILMN LIFE Industry Average (Scientific & Technical Instruments)
Market Cap: 473.13M 333.95M 6.76B 11.20B 19.19M
Employees: 278 1,100 2,400 10,000 5.86K
Qtrly Rev Growth (yoy): 0.21 0.30 0.24 -0.01 0.00
Revenue: 52.33M 295.62M 1.15B 3.80B 654.65K
Gross Margin: 0.71 0.55 0.69 0.66 0.60
EBITDA: -15.93M 15.29M 327.76M 1.20B -1.76M
Operating Margin: -0.35 -0.07 0.23 0.21 0.25
Net Income: -19.02M -10.70M 151.25M 430.86M N/A
EPS: -0.86 -0.15 1.13 2.40 1.56
P/E: N/A N/A 48.26 27.37 N/A
PEG (5 yr expected): -1.11 2.04 1.96 1.52 N/A
P/S: 9.04 1.13 5.89 2.95 29.32
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Fluidigm is trading at a higher P/S multiple than its direct competitors.

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 $4.02 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, relatively high P/S ratio and the intensive insider selling activity.

2. Adobe Systems Incorporated (NASDAQ:ADBE) operates as a diversified software company worldwide.

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Insider selling by insider (last 30 days)

  • David Wadhwani sold 12,981 shares on March 22 - April 2 and currently holds 20,589 shares or less than 0.1% of the company. David Wadhwani is Senior Vice President and General Manager, Digital Media.
  • James Daley sold 40,000 shares on March 21-28 and currently holds 8,000 shares or less than 0.1% of the company. James Daley serves as a director of the company.
  • Richard Rowley sold 59,339 shares on March 21-28 and currently holds 16,981 shares or less than 0.1% of the company. Richard Rowley is Vice President, Controller.
  • Mark Garrett sold 30,000 shares on March 26 and currently holds 67,847 shares or less than 0.1% of the company. Mark Garrett is Executive Vice President and Chief Financial Officer.
  • Kevin Lynch sold 324,440 shares on March 21 and currently holds 49,160 shares or less than 0.1% of the company. Kevin Lynch is a former Chief Technology Officer & Executive Vice President.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 798 0
March 2013 465,962 0
February 2013 0 0
January 2013 284,177 5,000
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There have been 750,937 shares sold and 5,000 shares purchased this year.

Financials

The company reported the fiscal 2013 first-quarter, which ended March 1, 2013, financial results on March 19 with the following highlights:

Revenue $1.0 billion
Net income $185.2 million
Cash $3.7 billion
Debt $1.5 billion
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Outlook

  • For the second quarter of fiscal 2013, Adobe is targeting a revenue range of $975 million to $1,025 million, GAAP earnings per share in the range of $0.08 to $0.14 per share and non-GAAP earnings per share in the range of $0.29 to $0.35.
  • For full fiscal year 2013, Adobe is targeting GAAP earnings per share of approximately $0.62 per share and non-GAAP earnings per share of approximately $1.45.

Competition

Adobe's competitors include Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). Here is a table comparing these companies.

Company ADBE AAPL MSFT Industry Average (Application Software)
Market Cap: 21.79B 409.08B 241.82B 57.44M
Employees: 11,144 72,800 94,000 79.00
Qtrly Rev Growth (yoy): -0.04 0.18 0.03 0.00
Revenue: 4.37B 164.69B 72.93B 12.93M
Gross Margin: 0.88 0.42 0.75 0.87
EBITDA: 1.30B 59.26B 28.87B -2.47M
Operating Margin: 0.23 0.33 0.35 -0.21
Net Income: 712.68M 41.75B 15.46B N/A
EPS: 1.42 44.11 1.82 N/A
P/E: 30.82 9.88 15.86 N/A
PEG (5 yr expected): 2.74 0.54 1.10 N/A
P/S: 5.01 2.45 3.31 4.44
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Adobe 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 eight analyst buy ratings, 12 neutral ratings and three sell ratings, with an average target price of $37.14. The stock is trading at a P/E ratio of 30.82 and a forward P/E ratio of 24.36. The company has a book value of $13.77 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.

3. Brady Corporation (NYSE:BRC) provides identification solutions and specialty materials in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific.

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Insider selling by insider (last 30 days)

  • Peter Sephton sold 9,000 shares on April 2 and currently holds 41,400 shares or less than 0.1% of the company. Peter Sephton is President, Brady Europe.
  • Stephen Millar sold 6,000 shares on March 28 and currently holds zero shares of the company. Stephen Millar is President, Brady Asia Pacific.
  • Allan Klotsche sold 10,000 shares on March 21-22 and currently holds 3,010 shares or less than 0.1% of the company. Allan Klotsche is Senior Vice President, Human Resources.
  • Frank Harris sold 3,000 shares on March 5 and currently holds 28,745 shares or less than 0.1% of the company. Frank Harris serves as a director of the company.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 9,000 0
March 2013 19,500 0
February 2013 3,000 0
January 2013 24,000 0
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There have been 55,500 shares sold and zero shares purchased this year.

Financials

The company reported the fiscal 2013 second-quarter, which ended January 31, financial results on February 21 with the following highlights:

Revenue $324.2 million
Net loss $8.7 million
Cash $141.3 million
Debt $438.0 million
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Outlook

The company expects earnings per diluted Class A Common Share to be towards the lower end of its prior guidance of between $2.20 and $2.40, exclusive of non-routine items, restructuring charges, and other items, for its full-year fiscal 2013, with the fourth quarter being stronger than the third quarter.

Competition

Brady's competitors include 3M (NYSE:MMM) and Avery Dennison Corporation (NYSE:AVY). Here is a table comparing these companies.

Company BRC MMM AVY
Market Cap: 1.65B 72.84B 4.12B
Employees: 6,900 87,677 29,800
Qtrly Rev Growth (yoy): 0.01 0.04 0.05
Revenue: 1.32B 29.90B 6.04B
Gross Margin: 0.48 0.48 0.26
EBITDA: 197.66M 7.77B 618.30M
Operating Margin: 0.12 0.22 0.07
Net Income: 57.81M 4.44B 169.10M
EPS: 1.11 6.32 2.08
P/E: 28.86 16.70 19.80
PEG (5 yr expected): 1.50 1.49 1.34
P/S: 1.27 2.46 0.70
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Brady's valuation is in line with its competitors.

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 28.86 and a forward P/E ratio of 12.67. The company has a book value of $20.12 per share and the stock has a dividend yield of 2.34%. 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.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within 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.