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There was intensive insider selling in Edwards Lifesciences (NYSE:EW) in October, 2012, when the stock was trading at above $100. The stock is currently trading at $62.54 or 43.6% below the October, 2012, all time high.

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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. Fusion-io (NYSE:FIO) engages in the development, marketing, and sale of storage memory platforms for enterprise data decentralization primarily in the United States.

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Insider selling by insider (last 30 days)

  • Neil Carson sold 40,625 shares on April 25 pursuant to a Rule 10b5-1 trading plan. Neil Carson currently holds 173,959 options or 0.2% of the company. Neil Carson is Fusion-io Asia Pacific CTO and Vice President.
  • James Dawson sold 75,000 shares on April 24-25 pursuant to a Rule 10b5-1 trading plan. James Dawson currently holds 419,458 options or 0.4% of the company. James Dawson has served as Executive Vice President, Worldwide Sales since October 2010.
  • Dennis Wolf sold 15,000 shares on April 24 pursuant to a Rule 10b5-1 trading plan. Dennis Wolf currently holds 108,650 options or 0.1% of the company. Dennis Wolf has served as Chief Financial Officer and Executive Vice President since October 2010.
  • Richard Boberg sold 10,000 shares on April 22 pursuant to a Rule 10b5-1 trading plan. Richard Boberg currently controls 184,132 shares or 0.2% of the company. Richard Boberg has served as Executive Vice President, Strategic Business Development and General Manager of Caching Solutions since August 2012.
  • Lance Smith sold 19,583 shares on April 18 pursuant to a Rule 10b5-1 trading plan. Lance Smith currently holds 118,750 options or 0.1% of the company. Lance Smith has served as Chief Operating Officer since April 2010.

Insider selling by calendar month

Here is a table of Fusion-io's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
April 2013160,2080
March 201344,5840
February 201351,0830
January 201385,1240

The month of April has seen the most insider selling this year.

Financials

The company reported the fiscal 2013 third-quarter, which ended March 31, financial results on April 24 with the following highlights:

Revenue$87.7 million
Net loss$20.0 million
Cash$354.6 million

Outlook

Fourth quarter of fiscal year 2013:

  • Revenue is expected to be approximately $110 million.
  • Non-GAAP gross margin is expected to be 56 to 58%.
  • Non-GAAP operating loss of approximately $5 million.
  • Diluted shares outstanding are expected to be approximately 98 million shares.

Fiscal Year 2013 guidance:

  • Revenue is expected to be approximately $435 million.
  • Non-GAAP gross margin is expected to be in the range of 59 to 60%.
  • Non-GAAP operating margin is expected to be in the range of 7 to 8%.
  • Diluted shares outstanding are expected to be approximately 109 million shares.

Competition

Fusion-io's competitors include EMC Corporation (NYSE:EMC), NetApp (NASDAQ:NTAP) and STEC, Inc. (NASDAQ:STEC). Here is a table comparing these companies.

CompanyFIOEMCNTAPSTEC
Market Cap:1.87B47.04B12.57B168.52M
Employees:66960,00012,149904
Qtrly Rev Growth (yoy):-0.070.060.04-0.40
Revenue:432.93M22.01B6.32B168.31M
Gross Margin:0.590.630.590.36
EBITDA:3.20M5.24B857.50M-66.92M
Operating Margin:-0.020.190.10-0.49
Net Income:-16.77M2.73B512.20M-103.22M
EPS:-0.181.231.39-2.22
P/E:N/A18.2825.16N/A
PEG (5 yr expected):3.670.921.31-0.16
P/S:4.352.161.991.00

Fusion-io is trading at a higher P/S ratio than its competitors.

My analysis

There have been five 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 64.23 and the company has a book value of $5.28 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. Texas Instruments (NASDAQ:TXN) engages in the design, manufacture, sale of semiconductors to electronics designers and manufacturers worldwide.

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Insider selling by insider (last 30 days)

  • Kevin March sold 40,000 shares on April 30 and currently holds 342,440 shares or less than 0.1% of the company. Kevin March was named senior vice president and chief financial officer of Texas Instruments in October 2003.
  • Brian Crutcher sold 88,000 shares on April 30 and currently holds 441,667 shares or less than 0.1% of the company. Brian Crutcher is the senior vice president and general manager of TI's Analog business.
  • Sami Kiriaki sold 59,050 shares on April 25 and currently holds 104,819 shares or less than 0.1% of the company. Sami Kiriaki is senior vice president and worldwide manager of the Texas Instruments Power Management business unit within the company's Analog division.
  • Kevin Ritchie sold 415,625 shares on April 25 and currently holds 241,669 shares or less than 0.1% of the company. Kevin Ritchie is a senior vice president of Texas Instruments and is responsible for the company's Technology and Manufacturing Group, which includes both silicon technology development and manufacturing operations.
  • Ruth Simmons sold 22,000 shares on April 25 and currently holds 27,025 shares or less than 0.1% of the company. Ruth Simmons serves as a director of the company.
  • David Heacock sold 2,500 shares on April 23 pursuant to a Rule 10b5-1 trading plan. David Heacock currently holds 168,474 shares or less than 0.1% of the company. David Heacock is senior vice president and manager of Texas Instruments Silicon Valley Analog.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
April 2013627,1750
March 20135,0000
February 2013448,4010
January 2013629,8470

There have been 1,710,423 shares sold and zero shares purchased this year.

Financials

The company reported the first-quarter financial results on April 22 with the following highlights:

Revenue$2.9 billion
Net income$362 million
Cash$3.9 billion
Debt$5.7 billion

Outlook

For the second quarter of 2013, TI expects:

● Revenue: $2.93 - $3.17 billion

● Earnings per share: $0.37 - $0.45

For the full year of 2013, TI expects approximately the following:

● R&D expense: $1.5 billion

● Capital expenditures: $0.5 billion

● Depreciation: $0.9 billion

Competition

TI's competitors include Qualcomm (NASDAQ:QCOM) and STMicroelectronics (NYSE:STM). Here is a table comparing these companies.

CompanyTXNQCOMSTMIndustry Average (Semiconductor - Broad Line)
Market Cap:39.64B106.30B7.34B1.53B
Employees:34,15126,60048,4602.39K
Qtrly Rev Growth (yoy):-0.080.24-0.000.35
Revenue:12.59B21.64B8.48B757.33M
Gross Margin:0.500.620.330.38
EBITDA:3.92B7.63B473.00M67.30M
Operating Margin:0.210.31-0.06-0.02
Net Income:1.82B6.23B-1.15BN/A
EPS:1.623.56-1.29-0.11
P/E:22.1317.26N/A27.79
PEG (5 yr expected):2.790.9482.601.17
P/S:3.164.990.861.66

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

My analysis

There have been six 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 22.13 and a forward P/E ratio of 17.43. The company has a book value of $9.89 per share and the stock has a dividend yield of 3.13%. 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.

3. Lithia Motors (NYSE:LAD) operates as an automotive franchisee and retailer of new and used vehicles in the United States.

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Insider selling by insider (last 30 days)

  • Scott Hillier sold 40,000 shares on April 26 and currently holds 52,810 shares or 0.2% of the company. Scott Hillier is Senior Vice President of Operations.
  • John North sold 1,805 shares on April 25 and currently holds 14,261 shares or less than 0.1% of the company. John North serves as Vice President of Finance and Corporate Controller.
  • Chris Holzshu sold 20,000 shares on April 25 and currently holds 42,790 shares or 0.2% of the company. Chris Holzshu serves as Senior Vice President and Chief Financial Officer.
  • Bryan Deboer sold 92,425 shares on April 25 and currently holds 92,500 shares or 0.4% of the company. Bryan Deboer serves as President and Chief Executive Officer.
  • Lithia Holding Co LLC sold 131,022 shares on April 1-25 pursuant to a Rule 10b5-1 trading plan. Lithia Holding Co LLC currently holds zero shares of the company.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
April 2013285,2520
March 201387,4760
February 20133,0850
January 201300

The month of April has seen the most insider selling this year.

Financials

The company reported the first-quarter financial results on April 24 with the following highlights:

Revenue$903.1 million
Net income$22.1 million
Cash$15.0 million
Debt$813.3 million

Outlook

Lithia projects 2013 second quarter earnings of $0.86 to $0.88 per diluted share and full-year 2013 earnings of $3.48 to $3.55 per diluted share. Both projections are based on the following annual assumptions:

  • Total revenues of $3.8 to $3.9 billion
  • New vehicle same store sales increasing 15.5%
  • New vehicle gross margin of 6.9% to 7.1%
  • Used vehicle same store sales increasing 13.0%
  • Used vehicle gross margin of 14.3% to 14.5%
  • Service body and parts same store sales increasing 7.0%
  • Service body and parts gross margin of 48.2% to 48.4%
  • Finance and insurance gross profit of $1,100 per unit
  • Tax rate of 39.5%
  • Average diluted shares outstanding of 26.5 million
  • Capital expenditures of $55 million

Competition

Lithia's competitors include AutoNation (NYSE:AN), CarMax (NYSE:KMX) and Penske Automotive Group (NYSE:PAG). Here is a table comparing these companies.

CompanyLADANKMXPAGIndustry Average (Auto Dealerships)
Market Cap:1.27B5.41B10.13B2.69B1.23B
Employees:5,04321,000N/A16,7007.00K
Qtrly Rev Growth (yoy):0.190.120.140.190.05
Revenue:3.48B16.11B11.26B13.16B3.48B
Gross Margin:0.160.160.160.150.16
EBITDA:174.52M766.00M827.88M418.85M187.26M
Operating Margin:0.050.040.070.030.04
Net Income:84.64M327.00M434.28M193.03MN/A
EPS:3.282.641.872.050.57
P/E:14.8416.9023.9714.5114.84
PEG (5 yr expected):0.550.791.770.580.89
P/S:0.360.340.900.200.55

Lithia's valuation is in line with the industry average.

My analysis

There have been 13 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 14.84 and a forward P/E ratio of 12.38. The company has a book value of $19.54 per share and the stock has a dividend yield of 0.82%. 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.

Source: 2 Tech Stocks And 1 Car Dealer With Recent Intensive Insider Selling