1 Drug Store, 1 Drug Wholesaler And 1 Electric Utility With Recent Intensive Insider Selling

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 |  Includes: MCK, PPL, RAD
by: Markus Aarnio

There was intensive insider selling in Newmont Mining (NYSE:NEM) in late February to early March this year at above $39. The stock plunged to $31.77 on April 23, or 24% in less than one month.

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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. Rite Aid Corporation (NYSE:RAD) operates retail drugstores in the United States.

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Insider selling by insider (last 30 days)

  • Brian Fiala sold 691,700 shares on April 22 and currently holds 815,805 shares or less than 0.1% of the company. Brian Fiala is Executive Vice President, Human Resources.
  • Jean Coutu Group sold 72,500,000 shares on April 16 and currently holds 105,901,162 shares or 11.7% of the company.
  • Mary Sammons sold 693,560 shares on April 15 and currently holds 841,797 shares or less than 0.1% of the company. Mary Sammons has been a member of Rite Aid's Board of Directors since December 5, 1999.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 73,885,260 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
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The month of April has seen all of the insider selling this year.

Financials

The company reported the full fiscal year 2013, which ended March 2, financial results on April 11 with the following highlights:

Revenue $25.4 billion
Net income $118.1 million
Cash $129.5 million
Debt $6.0 billion
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Outlook

The company's full fiscal year 2014 guidance is as follows:

  • Sales are expected to be between $24.9 billion and $25.3 billion in fiscal 2014 with same store sales expected to range from a decrease of 0.75 percent to an increase of 0.75 percent over fiscal 2013.
  • Adjusted EBITDA is expected to be between $1.075 billion and $1.175 billion.
  • Net income is expected to be between $45 million and $200 million or income per diluted share of $0.04 to $0.20.
  • Capital expenditures are expected to be approximately $400 million.

Competition

Rite Aid's competitors include CVS Caremark Corporation (NYSE:CVS), Walgreen (WAG) and Wal-Mart Stores (NYSE:WMT). Here is a table comparing these companies.

Company RAD CVS WAG WMT
Market Cap: 2.24B 71.16B 46.69B 258.18B
Employees: 90,000 203,000 171,000 2,200,000
Qtrly Rev Growth (yoy): -0.10 N/A 0.00 0.04
Revenue: 25.39B 123.13B 70.79B 469.16B
Gross Margin: 0.29 0.18 0.29 0.25
EBITDA: 1.13B 8.98B 4.61B 36.30B
Operating Margin: 0.03 0.06 0.05 0.06
Net Income: 107.47M 3.88B 2.06B 17.00B
EPS: 0.12 3.03 2.25 5.02
P/E: 20.96 19.11 21.91 15.62
PEG (5 yr expected): 2.56 1.08 1.10 1.63
P/S: 0.09 0.58 0.66 0.56
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Rite Aid is trading at a lower P/S ratio than its competitors.

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 20.96 and a forward P/E ratio of 16.60. The company has a book value of -$2.72 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 negative book value and the intensive insider selling activity.

2. PPL Corporation (NYSE:PPL), an energy and utility holding company, engages in the generation, transmission, distribution, and sale of electricity to wholesale and retail customers in the United States and the United Kingdom.

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Insider selling by insider (last 30 days)

  • Robert Gabbard sold 42,000 shares on April 22 pursuant to a 10b5-1 plan. Robert Gabbard currently holds 453,334 options or less than 0.1% of the company. Robert Gabbard is president of PPL EnergyPlus, which manages PPL's wholesale and competitive retail energy sales and services operation.
  • William Spence sold 126,655 shares on April 22 pursuant to a 10b5-1 plan. William Spence currently holds 1,547,320 options or 0.3% of the company. William Spence is chairman, president and Chief Executive Officer of PPL Corporation.
  • Robert Grey sold 63,760 shares on April 15 pursuant to a 10b5-1 plan. Robert Grey currently holds 558,310 options or 0.1% of the company. Robert Grey is executive vice president, general counsel and secretary of PPL Corporation.
  • Rick Klingensmith sold 47,750 shares on April 12 pursuant to a 10b5-1 plan. Rick Klingensmith currently holds 330,090 options or less than 0.1% of the company. Rick Klingensmith is president of PPL Global, the subsidiary of PPL Corporation.
  • Victor Staffieri sold 45,350 shares on April 8 pursuant to a 10b5-1 plan. Victor Staffieri currently holds 357,624 options or less than 0.1% of the company. Victor Staffieri is chairman, chief executive officer and president of Louisville Gas and Electric and Kentucky Utilities, the subsidiaries of PPL Corporation.
  • Paul Farr sold 40,180 shares on March 25-28 pursuant to a 10b5-1 plan. Paul Farr currently holds 836,100 options or 0.1% of the company. Paul Farr is executive vice president and Chief Financial Officer of PPL Corporation.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 325,515 0
March 2013 72,272 0
February 2013 0 0
January 2013 75,407 0
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The month of April has seen the most insider selling this year.

Financials

The company reported the full year 2012 financial results on February 14 with the following highlights:

Revenue $12.3 billion
Net income $1.5 billion
Cash $901 million
Debt $20.1 billion
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Outlook

PPL's 2013 earnings forecast is $2.25 to $2.50 per share, with a midpoint of $2.37 per share.

Competition

PPL's competitors include American Electric Power (NYSE:AEP), Exelon Corporation (NYSE:EXC) and FirstEnergy (NYSE:FE). Here is a table comparing these companies.

Company PPL AEP EXC FE Industry Average (Electric Utilities)
Market Cap: 19.12B 24.72B 31.77B 19.31B 15.24B
Employees: 17,729 18,513 26,057 16,495 25.00K
Qtrly Rev Growth (yoy): -0.24 0.05 0.44 -0.20 0.14
Revenue: 12.29B 14.94B 23.49B 14.85B 18.14B
Gross Margin: 0.37 0.38 0.26 0.56 0.27
EBITDA: 4.41B 4.91B 7.25B 3.15B 4.90B
Operating Margin: 0.25 0.20 0.14 0.12 0.16
Net Income: 1.52B 1.26B 1.16B 770.00M N/A
EPS: 2.60 2.60 1.42 1.84 2.52
P/E: 12.62 19.59 26.17 25.09 19.49
PEG (5 yr expected): 5.04 4.30 -2.21 3.33 1.81
P/S: 1.55 1.65 1.34 1.29 1.65
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PPL's P/S ratio is in line with the industry average.

My analysis

There have been seven 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 12.62 and a forward P/E ratio of 15.12. The company has a book value of $18.00 per share and the stock has a dividend yield of 4.48%. 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. McKesson Corporation (NYSE:MCK) delivers pharmaceuticals, medical supplies, and healthcare information technologies to the healthcare industry primarily in the United States.

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Insider selling by insider (last 30 days)

  • Paul Julian sold 84,750 shares on April 23-24 pursuant to a Rule 10b5-1(c) plan. Paul Julian currently holds 84,750 options or less than 0.1% of the company. Paul Julian is Executive Vice President and Group President of McKesson Corporation.
  • Randall Spratt sold 27,500 shares on April 4-22 pursuant to a Rule 10b5-1(c) plan. Randall Spratt currently holds 44,506 shares or less than 0.1% of the company. Randall Spratt is Executive Vice President, Chief Information Officer and Chief Technology Officer of McKesson Corporation.
  • Brian Tyler sold 5,000 shares on April 15 pursuant to a Rule 10b5-1(c) trading plan. Brian Tyler currently holds 15,000 options or less than 0.1% of the company. Brian Tyler is Executive Vice President of Corporate Strategy and Business Development for McKesson Corporation.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
April 2013 117,250 0
March 2013 160,817 0
February 2013 234,750 0
January 2013 53,750 0
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There have been 566,567 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 January 31 with the following highlights:

Revenue $31.2 billion
Net income $298 million
Cash $2.7 billion
Debt $4.5 billion
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Outlook

McKesson expects Adjusted Earnings per diluted share of $7.10 to $7.30 for the fiscal year ending March 31, 2013.

Competition

McKesson's competitors include AmerisourceBergen Corporation (NYSE:ABC), Cardinal Health (NYSE:CAH) and Owens & Minor (NYSE:OMI). Here is a table comparing these companies.

Company MCK ABC CAH OMI Industry Average (Drugs Wholesale)
Market Cap: 24.92B 12.85B 15.13B 2.07B 14.93B
Employees: 37,700 13,400 32,500 6,500 32.50K
Qtrly Rev Growth (yoy): 0.01 0.06 -0.07 0.06 0.07
Revenue: 123.53B 80.64B 104.80B 8.91B 104.80B
Gross Margin: 0.06 0.03 0.05 0.10 0.05
EBITDA: 2.85B 1.43B 2.29B 247.42M 2.29B
Operating Margin: 0.02 0.02 0.02 0.02 0.02
Net Income: 1.60B 710.45M 1.14B 108.25M N/A
EPS: 6.60 2.90 3.29 1.72 3.29
P/E: 16.22 19.22 13.48 19.01 13.30
PEG (5 yr expected): 1.14 1.52 1.17 1.69 1.17
P/S: 0.20 0.16 0.14 0.23 0.14
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McKesson's P/S ratio is in line with the industry average.

My analysis

There have been three different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The stock is trading at a P/E ratio of 16.22 and a forward P/E ratio of 13.24. The company has a book value of $32.84 per share and the stock has a dividend yield of 0.75%. 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.