1 Biotech, 1 Financial And An Industrial Goods Company With Recent Intensive Insider Selling

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 |  Includes: FNGN, ILMN, THR
by: Markus Aarnio

There was intensive insider selling in Thermon Group (NYSE:THR) in December, 2012, at above $23. The stock is currently trading at $18.58 or 25% below the December, 2012, 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. Thermon Group Holdings provides thermal engineered solutions for process industries worldwide.

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Insider selling by insider (last 30 days)

  • Johannes van der Salm sold 12,500 shares on April 17 pursuant to a Rule 10b5-1 Plan. Johannes van der Salm currently holds 157,046 shares or 0.5% of the company. Johannes van der Salm is Senior Vice President, Global Operations.
  • Rodney Bingham sold 30,000 shares on April 12 pursuant to a Rule 10b5-1 Plan. Rodney Bingham currently controls 236,917 shares or 0.8% of the company. Rodney Bingham has served as President, Chief Executive Officer and Director since 2009.
  • George Alexander sold 30,000 shares on April 8 pursuant to a Rule 10b5-1 Plan. George Alexander currently controls 249,678 shares or 0.8% of the company. George Alexander is Executive Vice President, Global Sales.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 72,500 0
March 2013 70,003 0
February 2013 82,503 0
January 2013 82,503 0
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There have been 307,509 shares sold and zero shares purchased this year.

Financials

The company reported the fiscal 2013 third quarter, which ended December 31, 2012, financial results on February 7 with the following highlights:

Revenue $76.8 million
Net income $7.7 million
Cash $28.4 million
Debt $118.1 million
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Outlook

Backlog at Q3 was $107.1 million an increase of $4.9 million or 5%.

Competition

Thermon's competitors include Pentair (NYSE:PNR). Here is a table comparing these two companies.

Company THR PNR Industry Average (Diversified Machinery)
Market Cap: 578.56M 10.36B 8.63B
Employees: 755 29,700 24.50K
Qtrly Rev Growth (yoy): 0.11 1.02 0.08
Revenue: 279.98M 4.42B 14.03B
Gross Margin: 0.48 0.29 0.28
EBITDA: 73.78M 305.59M 1.91B
Operating Margin: 0.21 0.03 0.07
Net Income: 27.57M -107.19M N/A
EPS: 0.88 -0.84 2.59
P/E: 21.09 N/A 15.89
PEG (5 yr expected): 1.26 0.91 1.46
P/S: 2.09 2.36 0.83
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Thermon is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been three 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 21.09 and a forward P/E ratio of 16.30. The company has a book value of $7.14 per share. I believe there is an opportunity for a short entry with the $10 target price from the Point and Figure chart. I would place a stop loss at $26, which is the all time high. The three main reasons for the proposed short entry are relatively high P/S ratio, bearish Point and Figure chart and the intensive insider selling activity.

2. Financial Engines (NASDAQ:FNGN) provides independent, technology-enabled portfolio management services, investment advice, and retirement income services to participants in employer-sponsored defined contribution plans.

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Insider selling by insider (last 30 days)

  • Christopher Jones sold 36,000 shares on March 19 - April 18 pursuant to a 10b5-1 trading plan. Christopher Jones currently holds 106,562 shares or 0.2% of the company. Christopher Jones has served as Executive Vice President, Investment Management and Chief Investment Officer since January 2006.
  • Anne Tuttle sold 17,833 shares on April 1-16 pursuant to a 10b5-1 trading plan. Anne Tuttle currently holds 6,278 shares or less than 0.1% of the company. Anne Tuttle has served as Executive Vice President, General Counsel and Secretary since March 2009.
  • Paul Gamble sold 1,500 shares on April 1-15 pursuant to a 10b5-1 trading plan. Paul Gamble currently holds 19,752 shares or less than 0.1% of the company. Paul Gamble has served as Executive Vice President, Distribution and Institutional Services since November 2012.
  • Jeffrey Maggioncalda sold 30,000 shares on March 28 - April 11 pursuant to a 10b5-1 trading plan. Jeffrey Maggioncalda currently controls 165,055 shares or 0.3% of the company. Jeffrey Maggioncalda has served as Chief Executive Officer since November 2012.
  • Mary Lee Sharp sold 729 shares on April 8 pursuant to a 10b5-1 trading plan. Mary Lee Sharp currently holds 30,063 options or less than 0.1% of the company. Mary Lee Sharp has served as Executive Vice President of Human Resources since January 2012.
  • Raymond Sims sold 10,000 shares on April 3 pursuant to a 10b5-1 trading plan. Raymond Sims currently holds 7,127 shares or less than 0.1% of the company. Raymond Sims has served as Executive Vice President and Chief Financial Officer since August 1999.
  • Garry Hallee sold 20,000 shares on March 26 - April 2 pursuant to a 10b5-1 trading plan. Garry Hallee currently holds 54,562 shares or 0.1% of the company. Garry Hallee has served as Executive Vice President of Technology and Service Delivery since December 2009.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 63,062 0
March 2013 149,312 0
February 2013 216,229 0
January 2013 96,078 0
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There have been 524,681 shares sold and zero shares purchased this year.

Financials

The company reported the full year 2012 financial results on February 19 with the following highlights:

Revenue $185.8 million
Net income $18.6 million
Cash $181.2 million
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Outlook

The company estimates that its 2013 revenue will be in the range of $224 million to $229 million, and its 2013 non-GAAP adjusted EBITDA will be in the range of $69 million to $71 million.

Competition

Financial Engines' competitors include Ameriprise Financial (NYSE:AMP). Here is a table comparing these two companies.

Company FNGN AMP Industry Average (Asset Management)
Market Cap: 1.64B 14.69B 1.21B
Employees: 380 12,235 1.01K
Qtrly Rev Growth (yoy): 0.26 0.04 0.26
Revenue: 185.82M 10.26B 326.68M
Gross Margin: 0.62 0.53 0.77
EBITDA: 32.53M 2.68B 123.85M
Operating Margin: 0.16 0.24 0.37
Net Income: 18.57M 1.03B N/A
EPS: 0.37 4.62 0.41
P/E: 92.32 15.62 18.55
PEG (5 yr expected): 1.51 0.72 1.38
P/S: 8.77 1.38 3.56
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Financial Engines' P/S ratio is above the industry average, which could explain some of the insider selling.

My analysis

There have been 16 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 92.32 and a forward P/E ratio of 41.66. The company has a book value of $5.49 per share and the stock has a dividend yield of 0.59%. 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 the high P/E ratio, high P/S ratio and the intensive insider selling activity.

3. Illumina (NASDAQ:ILMN) develops, manufactures, and markets life science tools and integrated systems for the analysis of genetic variation and biological function in North America, Europe, Latin America, the Asia-Pacific, the Middle East, and South Africa.

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Insider selling by insider (last 30 days)

  • David Walt sold 15,000 shares on March 20 - April 17 pursuant to a 10b5-1 plan. David Walt currently holds 978,988 shares or 0.8% of the company. David Walt is one of the founders and has been a director and Chairman of Scientific Advisory Board since June 1998.
  • Marc Stapley sold 12,018 shares on March 20 - April 11 pursuant to a 10b5-1 plan. Marc Stapley currently holds 26,851 shares or less than 0.1% of the company. Marc Stapley is Senior Vice President and Chief Financial Officer for Illumina.
  • Jay Flatley sold 15,000 shares on March 28 - April 11 pursuant to a 10b5-1 plan. Jay Flatley currently holds 399,509 shares or 0.3% of the company. Jay Flatley was appointed President and CEO of Illumina in 1999.
  • Matthew Posard sold 48,232 shares on April 11 pursuant to a 10b5-1 plan. Matthew Posard currently holds 30,858 shares or less than 0.1% of the company. Matthew Posard is Senior Vice President and General Manager of Illumina's Translational & Consumer Genomics Business.
  • William Rastetter sold 20,000 shares on April 8 pursuant to a 10b5-1 plan. William Rastetter currently holds 10,287 shares or less than 0.1% of the company. William Rastetter has been a director since November 1998 and Chairman of the Board since January 2005.
  • Christian Cabou sold 16,500 shares on April 8 pursuant to a 10b5-1 plan. Christian Cabou currently holds 45,553 shares or less than 0.1% of the company. Christian Cabou is Senior Vice President & General Counsel.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 114,617 0
March 2013 26,601 0
February 2013 10,000 0
January 2013 100,500 0
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The month of April has seen the most insider selling.

Financials

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

Revenue $1.1 billion
Net income $151.3 million
Cash $1.4 billion
Debt $842.4 million
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Outlook

For 2013 Illumina is projecting 15% total company revenue growth and non-GAAP earnings per fully diluted share of $1.55 to $1.62, including the pending Verinata acquisition.

Competition

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

Company ILMN AFFX LIFE LMNX Industry Average (Biotechnology)
Market Cap: 6.96B 271.42M 12.53B 699.61M 152.66M
Employees: 2,400 1,100 10,000 687 81.00
Qtrly Rev Growth (yoy): 0.24 0.30 -0.01 0.16 0.07
Revenue: 1.15B 295.62M 3.80B 202.58M 25.98M
Gross Margin: 0.69 0.55 0.66 0.70 0.72
EBITDA: 327.76M 15.29M 1.20B 42.28M -22.54M
Operating Margin: 0.23 -0.07 0.21 0.14 -0.81
Net Income: 151.25M -10.70M 430.86M 12.41M N/A
EPS: 1.13 -0.15 2.40 0.30 -0.49
P/E: 49.64 N/A 30.62 55.97 18.62
PEG (5 yr expected): 2.08 2.67 1.73 0.74 N/A
P/S: 6.08 0.85 3.30 3.38 7.37
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Illumina's P/E ratio is above the industry average.

My analysis

There have been 11 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 49.64 and a forward P/E ratio of 28.91. The company has a book value of $10.63 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.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in THR over 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.