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The technology sector has been the second worst-performing group over the recent one year period with a loss of 3.2%.

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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. Splunk (SPLK) provides software solutions that provide real-time operational intelligence.

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Insider selling by insider (last 30 days)

  • Guido Schroeder sold 140,000 shares on April 3-5 pursuant to a Rule 10b5-1 trading plan. Guido Schroeder currently controls 750,000 shares or 0.8% of the company. Guido Schroeder has served as Splunk's Senior Vice President, Products since April 2012.
  • Godfrey Sullivan sold 290,000 shares on March 13 - April 3 pursuant to a Rule 10b5-1 trading plan adopted on September 20, 2012. Godfrey Sullivan currently controls 5,407,855 shares or 5.5% of the company. Godfrey Sullivan has served as the company's President, Chief Executive Officer and a member of board of directors since September 2008, and as Chairman since December 2011.
  • Thomas Schodorf sold 30,000 shares on March 11- April 2 pursuant to a Rule 10b5-1 trading plan adopted on September 18, 2012. Thomas Schodorf currently controls 818,468 shares or 0.8% of the company. Thomas Schodorf has served as the company's Senior Vice President, Field Operations since October 2009.
  • Leonard Stein sold 10,000 shares on April 1 pursuant to a Rule 10b5-1 trading plan adopted on September 29, 2012. Leonard Stein currently controls 349,998 shares or 0.4% of the company. Leonard Stein has served as the company's Senior Vice President, General Counsel since April 2011.
  • Nicholas Sturiale sold 11,151 shares on March 22-27 and currently controls 26,256 shares or less than 0.1% of the company. Nicholas Sturiale has served as a member of the company's board of directors since August 2004.
  • David Hornik sold 3,080 shares on March 19 and currently holds 1,650 shares or less than 0.1% of the company. David Hornik has served as a member of the company's board of directors since August 2004.
  • David Conte sold 27,500 shares on March 8 pursuant to a Rule 10b5-1 trading plan adopted on September 26, 2012. David Conte currently controls 806,470 shares or 0.8% of the company. David Conte has served as the company's Senior Vice President and Chief Financial Officer since July 2011.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
April 2013164,0000
March 2013413,5130
February 201394,0000
January 2013104,5000

There have been 776,013 shares sold and zero shares purchased this year.

Financials

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

Revenue$198.9 million
Net loss$36.7 million
Cash$305.9 million

Outlook

The company provided the following guidance for its fiscal 2014 first quarter (ending April 30, 2013):

  • Total revenue is expected to be between $52 million and $54 million.
  • Non-GAAP operating margin is expected to be between negative 10% and negative 12%.

The company provided the following guidance for its fiscal 2014 full year (ending January 31, 2014):

  • Total revenue is expected to be between $260 million and $270 million.
  • Non-GAAP operating margin is expected to be approximately zero.

Competition

Splunk's competitors include BMC Software (BMC). Here is a table comparing these two companies.

CompanySPLKBMCIndustry Average (Application Software)
Market Cap:4.10B6.45B1.09B
Employees:7366,9001.40K
Qtrly Rev Growth (yoy):0.510.060.31
Revenue:198.94M2.20B273.69M
Gross Margin:0.890.730.80
EBITDA:-17.24M608.20M60.63M
Operating Margin:-0.110.210.03
Net Income:-36.68M329.00MN/A
EPS:-0.462.060.55
P/E:N/A21.9241.77
PEG (5 yr expected):N/A1.101.16
P/S:20.372.943.80

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

My analysis

There have been 14 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 362.82 and the company has a book value of $2.40 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. RF Industries (RFIL) engages in the design, manufacture, and/or sale of communications equipment primarily to the radio and other professional communications related industries in the United States and internationally.

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Insider selling by insider (last 30 days)

  • Darren Clark sold 250,000 shares on March 14 - April 5 and currently holds 500,000 shares or 6.7% of the company. Darren Clark is CEO of a subsidiary of RF Industries.
  • Marvin Fink sold 32,380 shares on March 13-28 and currently holds 7,520 options or 0.1% of the company. Marvin Fink serves as a director of the company.
  • Howard Hill sold 70,000 shares on March 13-26 and currently controls 327,909 shares or 4.4% of the company. Howard Hill is Chief Executive Officer of the company.
  • David Sandberg sold 429,236 shares on March 11-25 and currently holds 1,911 options or less than 0.1% of the company. David Sandberg serves as a director of the company.
  • William Reynolds sold 8,000 shares on March 25 and currently holds 30,100 shares or 0.4% of the company. William Reynolds serves as a director of the company.
  • James Doss sold 48,832 shares on March 13-22 and currently holds zero shares of the company. James Doss is Secretary of the company.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
April 2013117,8380
March 2013763,8760
February 2013146,5580
January 2013232,3270

There have been 1,260,599 shares sold and zero shares purchased this year.

Financials

The company reported the fiscal year 2013 first-quarter, which ended January 31, financial results on March 12 with the following highlights:

Revenue$10.5 million
Net income$1.5 million
Cash$6.9 million

On March 18, 2013, RF Industries announced that its Board of Directors has increased its regular quarterly cash dividend by 40% from $0.05 per common share to $0.07 per common share, and that it will pay this increased dividend starting in this current quarter.

Outlook

Howard Hill, RFI's CEO, commented on March 12:

"We are optimistic that the second quarter will see growth in both sales and earnings over the second quarter of last year even though RF Wireless sales will decrease from last quarter as we deliver the last installment of the Los Angeles County Fire Department order."

Competition

RF Industries' competitors include Amphenol (APH), Arris Group (ARRS) and Molex (MOLX). Here is a table comparing these companies.

 

 

 

 

CompanyRFILAPHARRSMOLXIndustry Average (Diversified Electronics)
Market Cap:48.18M11.51B1.89B5.00B103.40M
Employees:17841,6002,17534,2263.14K
Qtrly Rev Growth (yoy):0.890.210.220.130.23
Revenue:35.18M4.29B1.35B3.58B83.42M
Gross Margin:0.450.310.340.300.26
EBITDA:6.53M952.12M158.49M616.10M-2.44M
Operating Margin:0.170.190.070.110.03
Net Income:3.98M555.32M53.46M278.55MN/A
EPS:0.513.390.461.560.12
P/E:12.5121.2535.8718.0614.15
PEG (5 yr expected):N/A1.421.371.451.58
P/S:1.322.721.421.411.36

RF Industries' valuation is in line with the industry average.

My analysis

There have been 24 insider sell transactions and there have not been any insider buy transactions during the last 30 days. The stock is currently trading at a P/E ratio of 12.51 and the company has a book value of $3.03 per share. 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. Synchronoss Technologies (SNCR) provides software-based activation and personal cloud solutions for connected devices.

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Insider selling by insider (last 30 days)

  • Karen Rosenberger sold 113 shares on April 4 pursuant to an approved Rule 10b5-1 trading plan. Karen Rosenberger currently holds 19,773 shares or less than 0.1% of the company. Karen Rosenberger is Chief Accounting Officer.
  • Robert Garcia sold 10,370 shares on April 3-4 pursuant to an approved Rule 10b5-1 trading plan. Robert Garcia currently holds 92,652 shares or 0.2% of the company. Robert Garcia has been with Synchronoss since August 2000, and serves as President and Chief Operating Officer.
  • Patrick Doran sold 6,091 shares on March 7 - April 4 pursuant to an approved Rule 10b5-1 trading plan. Patrick Doran currently holds 39,644 shares or 0.1% of the company. Patrick Doran has been with Synchronoss since 2002 and serves as Chief Technology Officer.
  • Ronald Prague sold 2,205 shares on April 3 pursuant to an approved Rule 10b5-1 trading plan. Ronald Prague currently holds 30,758 shares or less than 0.1% of the company. Ronald Prague serves as Executive Vice President, General Counsel and Secretary and has been with Synchronoss Technologies since August of 2006.
  • Paula Hilbert sold 22,379 shares on March 7-28 pursuant to an approved Rule 10b5-1 trading plan. Paula Hilbert currently holds 33,376 shares or less than 0.1% of the company. Paula Hilbert is Executive Vice President of Human Resources.
  • Lawrence Irving sold 10,000 shares on March 26-27 pursuant to an approved Rule 10b5-1 trading plan. Lawrence Irving currently holds 167,390 shares or 0.4% of the company. Lawrence Irving is Chief Financial Officer, Executive Vice President and Treasurer.
  • Stephen Waldis sold 55,000 shares on March 19-21 pursuant to an approved Rule 10b5-1 trading plan. Stephen Waldis currently holds 988,716 shares or 2.5% of the company. Stephen Waldis is currently Founder, Chairman and Chief Executive Officer of Synchronoss Technologies.
  • Christopher Putnam sold 10,291 shares on March 15 and currently holds 33,637 shares or less than 0.1% of the company. Christopher Putnam is Executive Vice President.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
April 201315,0650
March 2013116,5180
February 201378,5510
January 201352,8570

There have been 262,991 shares sold and zero shares purchased this year.

Financials

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

Revenue$273.7 million
Net income$27.1 million
Cash$56.9 million
Debt$9.5 million

Outlook

The company's guidance for full-year 2013 is as follows:

  • Non-GAAP revenues are expected to be in the range of $330 million to $350 million, representing year-over-year growth of 20% to 27%.
  • Non-GAAP EPS of approximately $1.30 to $1.36.

The company' guidance for the first quarter 2013 is as follows:

  • Non-GAAP revenues in the range of $75 million to $78 million, which represents year-over-year growth of approximately 16% to 20%.
  • Non-GAAP EPS of approximately $0.27 to $0.29.

Competition

Synchronoss Technologies' competitors include Amdocs Limited (DOX), CSG Systems International (CSGS) and NeuStar (NSR). Here is a table comparing these companies.

 

 

 

 

CompanySNCRDOXCSGSNSRIndustry Average (Application Software)
Market Cap:1.06B5.70B644.44M2.84B2.46B
Employees:1,34020,1053,5421,54311.00
Qtrly Rev Growth (yoy):0.180.020.060.230.01
Revenue:273.69M3.27B756.87M831.39M970.67M
Gross Margin:0.580.360.490.780.75
EBITDA:60.63M604.44M151.99M370.10M163.07M
Operating Margin:0.140.140.130.33-0.99
Net Income:27.08M397.65M48.88M156.09MN/A
EPS:0.692.391.512.30N/A
P/E:40.7014.7413.4318.7035.09
PEG (5 yr expected):1.081.272.410.896.02
P/S:3.881.750.853.422.53

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

My analysis

There have been nine 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 40.70 and a forward P/E ratio of 17.23. The company has a book value of $9.68 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 relatively high P/S ratio and the intensive insider selling activity.

Source: 2 Software Companies And An Electronics Company With Recent Intensive Insider Selling