1 Tech Stock, 1 Industrial Goods Company And 1 Basic Materials Stock With Recent Intensive Insider Selling

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 |  Includes: ALJ, EA, EXP
by: Markus Aarnio

There was intensive insider selling in Electronic Arts (NASDAQ:EA) in November 2007, when the stock was trading above $55. The stock traded as low as $10.77 in July or 83.3% below the peak made in November 2007.

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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. Eagle Materials (NYSE:EXP) manufactures and distributes building products used in residential, industrial, commercial, and infrastructure construction in the United States.

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Insider selling by insider (last 30 days)

  • Michael Nicolais sold 9,225 shares on May 22 and currently holds 9,501 shares or less than 0.1% of the company. Michael Nicolais serves as a director of the company.
  • Gerald Essl sold 24,483 shares on May 22 and currently holds 36,143 shares or less than 0.1% of the company. Gerald Essl is Executive Vice President, Cement and Concrete/Aggregates.
  • David Powers sold 10,000 shares on May 21 and currently holds 43,929 shares or less than 0.1% of the company. David Powers is Executive Vice President, Gypsum.
  • Robert Stewart sold 2,941 shares on May 21 and currently holds 44,615 shares or less than 0.1% of the company. Robert Stewart is Executive Vice President, Strategy, Corporate Development and Communications.

Insider selling by calendar month

Here is a table of Eagle Materials' insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
May 2013 46,649 0
April 2013 0 0
March 2013 14,000 0
February 2013 121,691 0
January 2013 5,652 0
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There have been 187,992 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the full fiscal year 2013, which ended March 31, financial results on May 14 with the following highlights:

Revenue $642.6 million
Net income $57.7 million
Cash $3.9 million
Debt $489.3 million
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Competition

Eagle Materials' competitors include USG Corporation (NYSE:USG). Here is a table comparing these two companies.

Company EXP USG Industry Average (Cement)
Market Cap: 3.72B 3.01B 15.87B
Employees: N/A 8,500 76.00K
Qtrly Rev Growth (yoy): 0.36 0.04 0.21
Revenue: 642.56M 3.26B 15.11B
Gross Margin: 0.16 0.13 0.30
EBITDA: 131.13M 271.00M 2.11B
Operating Margin: 0.12 0.04 0.07
Net Income: 57.74M -152.00M N/A
EPS: 1.22 -0.91 0.99
P/E: 61.67 N/A 39.11
PEG (5 yr expected): 3.21 5.72 N/A
P/S: 5.77 0.94 0.90
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Eagle Materials is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been four different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 1.11%. The stock is trading at a P/E ratio of 61.67 and a forward P/E ratio of 16.95. The company has a book value of $14.06 per share and the stock has a dividend yield of 0.53%. 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 high P/S ratio, high P/E ratio and the intensive insider selling activity.

2. Alon USA Energy (NYSE:ALJ) engages in refining and marketing petroleum products primarily in the South Central, Southwestern, and Western regions of the United States.

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Insider selling by insider (last 30 days)

  • Michael Oster sold 12,541 shares on May 22 and currently holds 82,667 shares or 0.1% of the company. Michael Oster is Senior Vice President of Mergers and Acquisitions.
  • Shai Even sold 36,000 shares on May 20 and currently holds 100,104 shares or 0.2% of the company. Shai Even is Senior Vice President and Chief Financial Officer of Alon.
  • Alon Israel Oil Company sold 1,000,000 shares on May 16-17. Alon Israel Oil Company currently holds 34,522,306 shares or 55.1% of Alon USA Energy.
  • Jeff Morris sold 25,000 shares on May 13 pursuant to a 10b5-1 trading plan. Jeff Morris currently holds 415,488 shares or 0.7% of the company. Jeff Morris is Vice Chairman of Alon.

Insider selling by calendar month

Here is a table of Alon USA Energy's insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
May 2013 1,073,541 0
April 2013 0 0
March 2013 372,623 0
February 2013 241,912 0
January 2013 0 0
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The month of May has seen the most insider selling this year.

Financials

The company reported the first-quarter financial results on May 8 with the following highlights:

Revenue $1.7 billion
Net income $54.2 million
Cash $252.9 million
Debt $586.4 million
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Outlook

For the second quarter of 2013, the company expects the average throughput at the Big Spring refinery to be approximately 72,000 barrels per day and only 57,000 barrels per day at the Krotz Springs refinery due to repairs being performed on the reformer unit. At Krotz Springs, the company is planning to process 30,000 barrels per day of WTI during the second quarter of 2013. In addition, the company is in the process of completing a railcar unloading terminal facility at the Krotz Springs refinery with plans to ship an additional 6,000 barrels per day of WTI crude oil with its existing railcars.

Competition

Alon USA Energy's competitors include Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM) and Valero Energy Corporation (NYSE:VLO). Here is a table comparing these companies.

Company ALJ CVX XOM VLO Industry Average (Oil & Gas Refining & Marketing)
Market Cap: 1.09B 243.24B 406.98B 21.85B 14.30B
Employees: 2,824 62,000 76,900 21,671 15.01K
Qtrly Rev Growth (yoy): -0.08 -0.09 -0.13 -0.05 0.13
Revenue: 7.81B 217.73B 413.86B 136.59B 14.76B
Gross Margin: 0.09 0.30 0.30 0.06 0.08
EBITDA: 529.89M 46.20B 71.86B 6.92B 34.06M
Operating Margin: 0.05 0.15 0.13 0.04 0.01
Net Income: 157.04M 25.89B 44.93B 3.17B N/A
EPS: 2.43 13.23 9.83 5.69 0.93
P/E: 7.19 9.48 9.31 7.04 11.62
PEG (5 yr expected): 1.52 6.41 6.30 0.83 N/A
P/S: 0.14 1.12 0.99 0.16 0.54
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Alon USA Energy's P/S ratio is below the industry average.

My analysis

There have been four different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 61.79%. The stock is trading at a P/E ratio of 7.19 and a forward P/E ratio of 11.06. The company has a book value of $10.30 per share and the stock has a dividend yield of 1.37%. The stock has a $10.5 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $10.5 target price. I would place a stop loss at $21, which is the 52 -week high. The two main reasons for the proposed short entry are bearish Point and Figure chart and the intensive insider selling activity.

3. Electronic Arts develops, markets, publishes, and distributes game software content and services for video game consoles, personal computers, mobile phones, tablets and electronic readers, and the Internet.

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Insider selling by insider (last 30 days)

  • Frank Gibeau sold 200,000 shares on May 24 and currently holds 266,155 shares or less than 0.1% of the company. Frank Gibeau is President, EA Labels.
  • Joel Linzner sold 25,000 shares on May 14-24 and currently holds 199,409 shares or less than 0.1% of the company. Joel Linzner has served as Senior Vice President of Legal and Business Affairs since April 2004.
  • Gabrielle Toledano sold 30,000 shares on May 15-24 and currently holds 63,872 shares or less than 0.1% of the company. Gabrielle Toledano is Executive Vice President and Chief Talent Officer, Electronic Arts.
  • Stephen Bene sold 47,886 shares on May 10-21 and currently holds 6,700 shares or less than 0.1% of the company. Stephen Bene has served as Senior Vice President, General Counsel and Corporate Secretary since October 2004.
  • Andrew Wilson sold 32,085 shares on May 9 and currently holds zero shares of the company. Andrew Wilson is the executive vice president of EA Sports.

Insider selling by calendar month

Here is a table of Electronic Arts' insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
May 2013 334,971 0
April 2013 0 0
March 2013 0 0
February 2013 107,939 31,300
January 2013 0 0
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The month of May has seen the most insider selling this year.

Financials

The company reported the full fiscal year 2013, which ended March 31, financial results on May 7 with the following highlights:

Revenue $3.8 billion
Net income $98 million
Cash $1.7 billion
Debt $559 million
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Outlook

The company's guidance is as follows:

First Quarter Fiscal Year 2014 Expectations - Ending June 30, 2013

  • GAAP net revenue is expected to be approximately $875 million.
  • Non-GAAP net revenue is expected to be approximately $450 million.
  • GAAP diluted earnings per share is expected to be approximately $0.33.
  • Non-GAAP diluted loss per share is expected to be approximately ($0.62).

Fiscal Year 2014 Expectations - Ending March 31, 2014

  • GAAP net revenue is expected to be approximately $3.50 billion.
  • Non-GAAP net revenue is expected to be approximately $4.00 billion.
  • GAAP diluted loss per share is expected to be approximately ($0.97).
  • Non-GAAP diluted earnings per share is expected to be approximately $1.20.

Competition

Electronic Arts' competitors include Activision Blizzard (NASDAQ:ATVI) and Nintendo (OTCPK:NTDOY). Here is a table comparing these companies.

Company EA ATVI NTDOY Industry Average (Multimedia & Graphics Software)
Market Cap: 6.85B 17.44B 13.34B 605.12M
Employees: N/A 6,700 N/A 750.00
Qtrly Rev Growth (yoy): -0.12 0.13 0.01 1.19
Revenue: 3.80B 5.01B 8.07B 180.59M
Gross Margin: 0.63 0.66 0.22 0.70
EBITDA: 348.00M 1.67B -302.08M 30.87M
Operating Margin: 0.02 0.31 -0.06 0.10
Net Income: 98.00M 1.19B 90.21M N/A
EPS: 0.31 1.08 0.09 0.40
P/E: 73.45 14.52 147.97 7.03
PEG (5 yr expected): 1.26 2.39 N/A 0.60
P/S: 1.80 3.47 1.68 2.40
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Electronic Arts' P/S ratio is below the industry average.

My analysis

There have been five different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 0.51%. There are five analyst buy ratings, 10 neutral ratings and one sell rating, with an average target price of $18.73. The stock is trading at a P/E ratio of 73.45 and a forward P/E ratio of 16.15. The company has a book value of $7.55 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 bearish analyst target prices and the intensive insider selling activity.

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