Seeking Alpha
Long/short equity, insider ownership
Profile| Send Message|
( followers)  

There was intensive insider selling in EnerNOC (NASDAQ:ENOC) in August 2010 when the stock was trading above $33. The stock is currently trading at $12.98 or 63.9% below the peak made in August 2010.

(click to enlarge)

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. Gap, Inc. (NYSE:GPS) operates as an apparel retail company. It offers apparel, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, Athleta, and Intermix brands.

(click to enlarge)

Insider selling by insider (last 30 days)

  • Glenn Murphy sold 400,000 shares on June 7 pursuant to a Rule 10b5-1 trading plan. Glenn Murphy currently controls 369,187 shares and 800,000 options or 0.3% of the company. Glenn Murphy joined Gap as Chairman of the Board and Chief Executive Officer in July 2007.
  • Stephen Sunnucks sold 529,999 shares on May 28-30 and currently holds 145,076 shares and 150,001 options or less than 0.1% of the company. Stephen Sunnucks is the global president of Gap brand.
  • Arthur Peck sold 286,201 shares on May 29 and currently holds 73,906 shares and 25,000 options or less than 0.1% of the company. Arthur Peck has been named the president of Growth, Innovation and Digital, effective in the beginning of fiscal year 2013.
  • Sabrina Simmons sold 8,540 shares on May 13 pursuant to a Rule 10b5-1 trading plan. Sabrina Simmons currently holds zero shares of the company. Sabrina Simmons is Executive Vice President and Chief Financial Officer of Gap.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
June 2013400,0000
May 20131,893,4900
April 2013549,7960
March 2013700,4350
February 201300
January 201300

There have been 3,543,721 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter, which ended May 4, financial results on May 23 with the following highlights:

Revenue$3.7 billion
Net income$333 million
Cash$1.6 billion
Debt$1.2 billion

Outlook

The company expects diluted earnings per share to be in the range of $2.52 to $2.60 for fiscal year 2013, or an 8 to12 percent increase from the prior year.

Competition

Gap's competitors include American Eagle Outfitters (NYSE:AEO) and The TJX Companies (NYSE:TJX). Here is a table comparing these companies.

CompanyGPSAEOTJXIndustry Average (Apparel Stores)
Market Cap:19.15B3.69B35.98B21.12B
Employees:136,0007,000179,00012.00K
Qtrly Rev Growth (yoy):0.07-0.040.070.19
Revenue:15.89B3.45B26.27B9.27B
Gross Margin:0.400.400.280.50
EBITDA:2.64B559.04M3.67B539.00M
Operating Margin:0.130.120.12-0.01
Net Income:1.24B248.04M1.94BN/A
EPS:2.571.102.62N/A
P/E:15.9717.4119.0733.13
PEG (5 yr expected):1.261.201.612.08
P/S:1.221.091.380.86

Gap's valuation is in line with its direct competitors.

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 7.15%. The stock is trading at a P/E ratio of 15.97 and a forward P/E ratio of 13.81. The company has a book value of $6.79 per share and the stock has a dividend yield of 1.44%. 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. Gilead Sciences (NASDAQ:GILD), a biopharmaceutical company, discovers, develops, and commercializes human therapeutics for the treatment of life threatening diseases in North America, Europe, and Asia.

(click to enlarge)

Insider selling by insider (last 30 days)

  • John Cogan sold 110,000 shares on June 7 pursuant to a Rule 10b5-1 trading plan. John Cogan currently holds 39,542 shares and 34,000 options or less than 0.1% of the company. John Cogan joined Gilead's Board of Directors in July 2005 and was appointed Lead Independent Director in May 2013.
  • John Martin sold 282,242 shares on June 3 pursuant to a Rule 10b5-1 trading plan. John Martin currently holds 4,057,121 shares and 1,693,452 options or 0.4% of the company. Dr. Martin joined Gilead Sciences in 1990 and currently serves as Chairman of the Board of Directors and Chief Executive Officer.
  • Gregg Alton sold 30,000 shares on June 3 pursuant to a Rule 10b5-1 trading plan. Gregg Alton currently holds 59,938 shares and 92,742 options or less than 0.1% of the company. Gregg Alton is Executive Vice President, Corporate and Medical Affairs.

Insider selling by calendar month

Here is a table of Gilead Sciences' insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
June 2013422,2420
May 2013312,2420
April 2013326,2100
March 2013416,3460
February 2013312,24210,000
January 2013267,6710

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

Financials

The company reported the first-quarter financial results on May 2 with the following highlights:

Revenue$2.5 billion
Net income$722.2 million
Cash$2.6 billion
Debt$8.0 billion

Outlook

The company's guidance for the full year 2013 is as follows:

Net product sales$10,000 - $10,200 million
Non-GAAP product gross margin74%-76%

Competition

Gilead Sciences' competitors include GlaxoSmithKline (NYSE:GSK), Pfizer (NYSE:PFE) and Roche Holding AG (OTCQX:RHHBY). Here is a table comparing these companies.

 

 

 

 

CompanyGILDGSKPFERHHBYIndustry Average (Biotechnology)
Market Cap:79.99B125.48B201.59B210.28B71.76B
Employees:5,00099,48889,40079,132450.00
Qtrly Rev Growth (yoy):0.11-0.03-0.090.120.27
Revenue:9.95B42.21B57.60B50.83B13.93B
Gross Margin:0.750.710.810.750.72
EBITDA:4.35B14.49B25.34B19.12B1.51B
Operating Margin:0.410.280.320.330.13
Net Income:2.87B6.78B10.52B10.22BN/A
EPS:1.792.742.092.990.61
P/E:29.3618.9413.6020.7418.43
PEG (5 yr expected):1.024.064.702.121.51
P/S:8.042.973.504.143.64

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

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 company has an insider ownership of 0.56%. The stock is trading at a P/E ratio of 29.36 and a forward P/E ratio of 18.02. The company has a book value of $6.65 per share. The stock has a $41 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $41 target price. I would place a stop loss at $58, 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.

3. Infoblox (NYSE:BLOX) develops, markets, and sells automated network control solutions worldwide.

(click to enlarge)

Insider selling by insider (last 30 days)

  • Sohail Parekh sold 23,000 shares on May 13 - June 10 pursuant to a Rule 10b5-1 trading plan. Sohail Parekh currently holds 30,000 shares and 139,506 options or 0.3% of the company. Sohail Parekh is Executive Vice President, Engineering.
  • Robert Thomas sold 100,000 shares on May 31 - June 5 and currently holds 888,833 shares and 409,814 options or 2.6% of the company. Robert Thomas is President and Chief Executive Officer of the company.
  • Steve Nye sold 16,000 shares on June 6 pursuant to a Rule 10b5-1 trading plan. Steve Nye currently holds 243,591 options or 0.5% of the company. Steve Nye is Executive Vice President of Product Strategy & Corporate Development.
  • Remo Canessa sold 94,000 shares on June 6 and currently holds 370,392 shares or 0.7% of the company. Remo Canessa is Chief Financial Officer of the company.
  • Christopher Andrews sold 60,000 shares on June 6-7 and currently holds 121,145 shares or 0.2% of the company. Christopher Andrews is Executive Vice President, Worldwide Field Operations.
  • Frank Marshall sold 12,500 shares on June 4 and currently controls 38,602 shares or less than 0.1% of the company. Frank Marshall serves as a director of the company.
  • David Gee sold 8,333 shares on June 3 pursuant to a Rule 10b5-1 trading plan. David Gee currently holds 23,000 shares and 218,751 options or 0.5% of the company. David Gee is Executive Vice President of Marketing.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
June 2013252,2370
May 201379,5290
April 201341,3330
March 2013455,0350
February 2013109,2400
January 201384,7430

There have been 1,022,117 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the fiscal 2013 third-quarter, which ended April 30, financial results on May 23 with the following highlights:

Revenue$58.0 million
Net loss$0.3 million
Cash$192 million

Outlook

For the fourth quarter ending July 31 the company currently expects:

  • Total net revenue in the range of $58 million to $59 million;
  • Non-GAAP gross margin to be approximately 78%;
  • Non-GAAP operating margin in the range of 8% to 9%; and
  • Non-GAAP diluted net income per share to be in the range of $0.08 to $0.09, assuming approximately 55.3 million shares on a non-GAAP diluted weighted average basis.

For the fiscal year ending July 31 the company currently expects total net revenue in the range of $220 million to $221 million.

Competition

Infoblox's competitors include Alcatel-Lucent (NYSE:ALU), Hewlett-Packard (NYSE:HPQ) and International Business Machines (NYSE:IBM). Here is a table comparing these companies.

 

 

 

 

CompanyBLOXALUHPQIBMIndustry Average (Business Services)
Market Cap:1.38B4.00B46.75B226.17B1.89B
Employees:52072,344331,800434,2464.00K
Qtrly Rev Growth (yoy):0.340.01-0.10-0.050.74
Revenue:207.06M18.73B115.57B103.24B3.05B
Gross Margin:0.780.300.240.480.34
EBITDA:-2.25M802.71M13.92B26.40B423.52M
Operating Margin:-0.040.000.080.210.17
Net Income:-10.24M-2.76B-13.40B16.57BN/A
EPS:-0.22-1.21-6.8514.501.44
P/E:N/AN/AN/A14.0711.99
PEG (5 yr expected):4.000.26N/A1.260.82
P/S:6.670.210.402.191.49

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

My analysis

There have been seven 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 2.86%. The stock is trading at a forward P/E ratio of 57.44 and the company has a book value of $3.42 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.

Source: 2 Services Sector Companies And 1 Biotech With Recent Intensive Insider Selling