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The basic materials sector has been the worst-performing group year to date with a loss of 3.5%.

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In this article, I will feature two basic materials companies that have seen intensive insider selling during the last 30 days. 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%.

1. LyondellBasell Industries N.V. (NYSE:LYB) manufacturers and sells chemicals and polymers; refines crude oil; produces gasoline blending components; and develops and licenses technologies for the production of polymers.

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Insider selling by insider (last 30 days)

  • Apollo Management Holdings Gp, LLC sold 17,000,000 shares on June 7, and currently holds 70,695,463 shares or 12.3% of LyondellBasell.
  • James Gallogly sold 83,335 shares on June 3, pursuant to a Rule 10b5-1 trading plan. James Gallogly currently holds 1,468,199 shares and 2,883,412 options or 0.8% of the company. James Gallogly is chief executive officer of LyondellBasell.
  • Samuel Smolik sold 22,033 shares on May 17, pursuant to a Rule 10b5-1 trading plan. Samuel Smolik currently holds 39,582 shares and 44,058 options or less than 0.1% of the company. Samuel Smolik is vice president, Health, Safety, Environment and Operational Excellence.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
June 201317,083,3350
May 2013125,5190
April 2013132,5810
March 201383,3330
February 201325,083,3330
January 201383,3330

There have been 42,591,434 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on April 26, with the following highlights:

Revenue$10.7 billion
Net income$906 million
Cash$2.9 billion
Debt$4.4 billion

Competition

LyondellBasell predominantly competes in regional markets impacted by global pricing mechanisms. Success in these markets is determined by competitive pricing, low cost production, product quality, reliability of product delivery and supply volumes, and customer service. Profitability is affected by regional raw material costs and price competition among producers. Historically, the chemical and refining industries have operated in competitive environments and those environments are expected to continue.

In addition to other chemical and refining companies, LyondellBasell competes with the chemical and refining divisions of major national and international oil companies both in the United States and abroad.

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 0.45%. The stock is trading at a P/E ratio of 12.33 and a forward P/E ratio of 9.44. The company has a book value of $20.23 per share and the stock has a dividend yield of 2.97%. 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. Newpark Resources (NYSE:NR) provides various products and services primarily to the oil and gas exploration industry.

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Insider selling by insider (last 30 days)

  • Bruce Smith sold 124,688 shares on June 13, pursuant to a Rule 10b5-1 Plan. Bruce Smith currently holds 237,727 shares or 0.3% of the company. Bruce Smith is Executive Vice President and President, Fluids Systems & Engineering.
  • Paul Howes sold 80,000 shares on June 10-11, pursuant to a Rule 10b5-1 Plan. Paul Howes currently holds 432,735 shares or 0.5% of the company. Paul Howes is President and Chief Executive Officer of the company.
  • Jerry Box sold 16,700 shares on May 16, and currently holds 111,172 shares or 0.1% of the company. Jerry Box serves as the Chairman of the Board.

Insider selling by calendar month

Here is a table of Newpark Resources' insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
June 2013204,6880
May 201366,7000
April 201300
March 2013375,0000
February 20139,4000
January 201300

There have been 655,788 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on April 25, with the following highlights:

Revenue$282.5 million
Net income$17.4 million
Cash$41.7 million
Debt$251.8 million

Competition

Newpark Resources' competitors include Baker Hughes Incorporated (NYSE:BHI), Halliburton Company (NYSE:HAL) and Schlumberger Limited (NYSE:SLB). Here is a table comparing these companies.

CompanyNRBHIHALSLB
Market Cap:943.41M20.34B40.01B95.19B
Employees:2,24858,90073,000118,000
Qtrly Rev Growth (yoy):0.08-0.020.020.08
Revenue:1.06B21.24B28.61B42.90B
Gross Margin:0.190.180.150.21
EBITDA:143.89M3.70B5.73B11.17B
Operating Margin:0.100.100.140.18
Net Income:61.77M1.20B1.93B5.42B
EPS:0.652.712.144.07
P/E:16.8516.9920.0217.57
PEG (5 yr expected):1.261.100.780.90
P/S:0.920.981.402.25

Newpark Resources' P/S ratio is below its direct competitors'.

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 0.81%. The stock is trading at a P/E ratio of 16.85 and a forward P/E ratio of 11.06. The company has a book value of $5.54 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.

Source: 2 Basic Materials Stocks With Recent Intensive Insider Selling