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There was intensive insider selling in Cisco (CSCO) in March 2010. The stock peaked at $27.74 in April 2010 and plunged all the way to $12.80 in August 2011 or 53.9% below the high made in March 2010.

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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. Vertex Pharmaceuticals (VRTX) engages in discovering, developing, manufacturing, and commercializing small molecule drugs for patients with serious diseases.

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Insider selling by insider (last 30 days)

  • Paul Silva sold 4,733 shares on April 25 - May 15 pursuant to a Rule 10b5-1 trading plan. Paul Silva currently holds 11,750 shares or less than 0.1% of the company. Paul Silva is Senior Vice President, Corporate Controller.
  • Ian Smith sold 609 shares on May 15 pursuant to a Rule 10b5-1 trading plan. Ian Smith currently holds 24,168 shares or less than 0.1% of the company. Ian Smith is Executive Vice President and Chief Financial Officer of the company.
  • Joshua Boger sold 1,400 shares on May 15 pursuant to a Rule 10b5-1 trading plan. Joshua Boger currently holds 352,895 shares or 0.2% of the company. Joshua Boger, Ph.D., founded Vertex in 1989 and was the company's Chief Executive Officer from 1992 until May 2009. Currently, Joshua Boger serves as a director of the company.
  • Bruce Sachs sold 68,300 shares on May 6-14 and currently holds 112,910 shares or less than 0.1% of the company. Bruce Sachs has served as a director since 1998 and is the Board's co-lead independent director.
  • Elaine Ullian sold 40,000 shares on May 3 and currently holds 5,265 shares or less than 0.1% of the company. Elaine Ullian has served as a director since 1997 and is the Board's co-lead independent director.
  • Christiana Stamoulis sold 83,602 shares on April 29 - May 15 pursuant to a Rule 10b5-1 trading plan. Christiana Stamoulis currently holds 40,712 shares or less than 0.1% of the company. Christiana Stamoulis is Senior Vice President, Corporate Strategy and Business Development.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
May 2013114,5190
April 2013852,3590
March 201300
February 201333,3450
January 20132,9510

There have been 1,003,174 shares sold and zero shares purchased this year.

Financials

The company reported the first-quarter financial results on April 30 with the following highlights:

Revenue$328.4 million
Non-GAAP net income$5.7 million
Cash$1.2 billion
Debt$716.8 million

Outlook

The company expects 2013 revenues to be in the range of $1.10 billion to $1.25 billion. The company expects total 2013 non-GAAP operating expenses to be $1.09 billion to $1.15 billion.

Competition

Vertex markets Incivek in direct competition with Merck's (MRK) Victrelis (boceprevir), another HCV protease inhibitor that was approved for sale in the United States and Europe in 2011.

A number of companies are seeking to identify and develop drug candidates for the treatment of cystic fibrosis [CF], including Novartis (NVS), Pfizer (PFE), Genzyme and several private companies. Vertex believes its competitors have research and development programs directed at identifying CFTR potentiators, CFTR correctors and drug candidates with other mechanisms of action with the goal of addressing the underlying cause of CF. While Vertex believes that it will be several years before any of these competitive programs enter late-stage clinical development, if one or more competing therapies are successfully developed as a treatment for patients with CF, Vertex's revenues from Kalydeco and/or Vertex's other CF drug candidates, if then approved, could face competitive pressures.

My analysis

There have been 11 insider sell transactions and there have not been any insider buy transactions during the last 30 days. The company has an insider ownership of 0.49% and the company has a book value of $3.41 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.

2. Vantiv (VNTV) provides electronic integrated payment processing services in the United States.

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Insider selling by insider (last 30 days)

  • Donald Boeding sold 20,000 shares on May 14-17 pursuant to a Rule 10b5-1 trading plan. Donald Boeding currently holds 267,192 shares or 0.1% of the company. Donald Boeding is President, Merchant Services.
  • Fifth Third Bancorp (FITB) sold 16,396,310 shares on May 15 pursuant to a secondary offering. Fifth Third Bancorp currently holds 53,822,826 shares or 27.7% of the company.
  • Christopher Pike sold 7,492 shares on May 15 pursuant to a secondary offering. Christopher Pike currently controls 15,028 shares or less than 0.1% of the company. Christopher Pike serves as a director of the company.
  • David Mussafer sold 23,294 shares on May 15 pursuant to a secondary offering. David Mussafer currently controls 46,726 shares or less than 0.1% of the company. David Mussafer serves as a director of the company.
  • Advent International LLC sold 24,318,394 shares on May 15 pursuant to a secondary offering. Advent International LLC currently controls 48,781,147 shares or 25.1% of the company.
  • Royal Cole sold 17,300 shares on May 7 pursuant to a Rule 10b5-1 trading plan. Royal Cole currently holds 240,101 shares or 0.1% of the company. Royal Cole is Financial Institution Services President.
  • Jeffrey Stiefler sold 16,400 shares on April 22 - May 8 pursuant to a Rule 10b5-1 trading plan. Jeffrey Stiefler currently controls 315,254 shares or 0.2% of the company. Jeffrey Stiefler is Chairman of the Board.
  • Mark Heimbouch sold 12,922 shares on May 6 pursuant to a Rule 10b5-1 trading plan. Mark Heimbouch currently holds 445,846 shares or 0.2% of the company. Mark Heimbouch joined Vantiv in 2009 as Chief Financial Officer.
  • Charles Drucker sold 69,550 shares on May 7 pursuant to a Rule 10b5-1 trading plan. Charles Drucker currently holds 1,409,323 shares or 0.7% of the company. Charles Drucker joined the company in 2004 as President and was named CEO in 2009.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
May 201340,873,4620
April 2013135,8210
March 2013189,0890
February 201335,9780
January 20135,0000

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

Financials

The company reported the first-quarter financial results on May 6 with the following highlights:

Net revenue$272.9 million
Net income$26.1 million
Cash$141.7 million
Debt$1.2 billion

Outlook

  • The company's annual net revenue guidance is $1.21 billion to $1.23 billion. The company's annual guidance for pro forma adjusted net income is $1.46 to $1.50 per share.
  • The company expects net revenues of $295 million to $300 million in the second quarter, which represents 13% to 15% growth and pro forma adjusted net income per share of $0.36 to $0.37, representing growth of 13% to 16%.
  • Beyond the second quarter, the company expects pro forma adjusted net income per share to step up sequentially for the remaining two quarters of 2013.

Competition

Vantiv's competitors include Heartland Payment Systems (HPY). Here is a table comparing these two companies.

CompanyVNTVHPYIndustry Average (Business Services)
Market Cap:3.63B1.12B1.89B
Employees:2,6713,0024.00K
Qtrly Rev Growth (yoy):0.150.070.74
Revenue:1.93B2.05B3.05B
Gross Margin:0.550.140.34
EBITDA:491.94M141.49M423.52M
Operating Margin:0.170.060.17
Net Income:102.09M65.86MN/A
EPS:0.801.821.44
P/E:32.8116.9211.99
PEG (5 yr expected):1.031.060.82
P/S:1.880.551.49

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

My analysis

There have been 10 insider sell transactions and there have not been any insider buy transactions during the last 30 days. The company has an insider ownership of 33.23%. The stock is trading at a P/E ratio of 32.81 and a forward P/E ratio of 14.78. The company has a book value of $3.98 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.

3. Cisco Systems designs, manufactures, and sells Internet protocol based networking and other products related to the communications and information technology industries worldwide.

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Insider selling by insider (last 30 days)

  • Randall Pond sold 49,583 shares on May 20 pursuant to a Rule 10b5-1 plan. Randall Pond currently holds 220,052 shares or less than 0.1% of the company. Randall Pond is Executive Vice President of Operations, Processes, and Systems at Cisco.
  • Gary Moore sold 45,070 shares on May 20 pursuant to a Rule 10b5-1 plan. Gary Moore currently holds 802,389 shares or less than 0.1% of the company. Gary Moore is the President and Chief Operating Officer of Cisco.
  • Roderick McGeary sold 20,000 shares on May 20 and currently holds 100,752 shares or less than 0.1% of the company. Roderick McGeary has been a member of the Board of Directors since July 2003.
  • Blair Christie sold 34,000 shares on May 20 pursuant to a Rule 10b5-1 trading plan. Blair Christie currently holds 369,082 shares or less than 0.1% of the company. Blair Christie is Cisco's Chief Marketing Officer.
  • Mark Chandler sold 100,000 shares on May 20 and currently holds 394,241 shares or less than 0.1% of the company. Mark Chandler is Senior Vice President, General Counsel and Secretary of Cisco.
  • John Chambers sold 1,500,000 shares on May 20 pursuant to a Rule 10b5-1 trading plan. John Chambers currently holds 2,773,945 shares or less than 0.1% of the company. John Chambers is Chairman and CEO of Cisco.
  • Frank Calderoni sold 78,000 shares on May 20 pursuant to a Rule 10b5-1 trading plan. Frank Calderoni currently holds 632,790 shares or less than 0.1% of the company. Frank Calderoni is Executive Vice President and Chief Financial Officer at Cisco.
  • Prat Bhatt sold 51,839 shares on May 21 and currently holds 219,625 shares or less than 0.1% of the company. Prat Bhatt is Senior Vice President, Corporate Controller & CAO.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
May 20131,878,4920
April 201300
March 2013591,9290
February 2013209,8030
January 201325,0000

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

Financials

The company reported the fiscal 2013 third-quarter, which ended April 27, financial results on May 15 with the following highlights:

Revenue$12.2 billion
Net income$2.5 billion
Cash$47.4 billion
Debt$16.2 billion

Outlook

  • For Q4 FY13 Cisco expects revenue growth to be in the range of 4% to 7% on a year-over-year basis.
  • Cisco expects its Q4 FY13 non-GAAP earnings per share to range from $0.50 to $0.52 per share and Cisco anticipates that its GAAP earnings in Q4 will be $0.07 to $0.10 per share lower than its non-GAAP EPS.

Competition

Cisco's competitors include Alcatel-Lucent (ALU), Hewlett-Packard (HPQ) and Juniper Networks (JNPR). Here is a table comparing these companies.

CompanyCSCOALUHPQJNPRIndustry Average (Networking & Communication Devices)
Market Cap:124.38B3.29B41.27B8.82B53.99M
Employees:66,63972,344331,8009,234N/A
Qtrly Rev Growth (yoy):0.050.01-0.060.03-0.10
Revenue:47.88B18.73B118.68B4.39B137.66M
Gross Margin:0.610.300.240.640.23
EBITDA:13.52B1.02B14.36B659.20M9.17M
Operating Margin:0.230.020.080.110.05
Net Income:9.63B-2.58B-12.89B261.20MN/A
EPS:1.80-1.13-6.550.50N/A
P/E:12.97N/AN/A34.84N/A
PEG (5 yr expected):1.430.23-7.651.00N/A
P/S:2.600.180.352.010.39

Cisco 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. The company has an insider ownership of 0.10%. The stock is trading at a P/E ratio of 12.97 and a forward P/E ratio of 11.11. The company has a book value of $10.65 per share and the stock has a dividend yield of 2.91%. 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: 1 Tech, 1 Biotech And 1 Business Services Company With Recent Intensive Insider Selling