2 Service-Sector Companies With Recent Intensive Insider Selling

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Includes: CHTR, TWX
by: Markus Aarnio

The service sector has been the second-best performing group year to date with a gain of 19.6%.

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In this article, I will feature two service-sector 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. Time Warner Cable (TWC) offers video, high-speed data, and voice services to residential and business service customers over its broadband cable systems in the United States.

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Insider selling by insider (last 30 days)

  • Gail Mackinnon sold 11,434 shares on June 14, and currently holds 7,453 shares or less than 0.1% of the company. Gail Mackinnon was named Executive Vice President and Chief Government Relations Officer for Time Warner Cable in 2008.
  • Ellen East sold 5,139 shares on June 14, pursuant to a Rule 10b5-1 trading plan. Ellen East currently holds 10,018 shares and 10,278 options or less than 0.1% of the company. Ellen East is Executive Vice President and Chief Communications Officer for Time Warner Cable.
  • Glenn Britt sold 50,000 shares on May 22, pursuant to a Rule 10b5-1 trading plan. Glenn Britt currently holds 167,775 shares and 109,963 options or less than 0.1% of the company. Glenn Britt is Chairman and Chief Executive Officer of Time Warner Cable.
  • Michael LaJoie sold 12,549 shares on May 20, and currently holds 7,764 shares and 2,000 options or less than 0.1% of the company. Michael LaJoie leads the Technology and Network Operations Group at Time Warner Cable.

Insider selling by calendar month

Here is a table of Time Warner Cable's insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
June 2013 16,573 0
May 2013 224,594 0
April 2013 10,016 0
March 2013 0 0
February 2013 64,360 0
January 2013 0 0
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There have been 315,543 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 $5.5 billion
Net income $401 million
Net debt $23.6 million
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Competition

Time Warner Cable's residential video, high-speed data and voice services face competition from the video, digital subscriber line [DSL], wireless broadband and wireline and wireless phone offerings of AT&T (NYSE:T) and Verizon (NYSE:VZ). Time Warner Cable's residential video service faces competition from DBS services, primarily DISH Network (NASDAQ:DISH) and Directv (DTV).

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 0.10%. The stock is trading at a P/E ratio of 14.64 and a forward P/E ratio of 13.46. The company has a book value of $23.51 per share and the stock has a dividend yield of 2.57%. 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. Time Warner (NYSE:TWX) operates as a media and entertainment company in the United States and internationally.

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Insider selling by insider (last 30 days)

  • Pascal Desroches sold 12,143 shares on June 14, and currently holds 6,188 options or less than 0.1% of the company. Pascal Desroches is Senior Vice President and Controller.
  • Jessica Einhorn sold 13,178 shares on May 30 - June 13, pursuant to a Rule 10b5-1 trading plan. Jessica Einhorn currently holds 18,007 shares or less than 0.1% of the company. Jessica Einhorn serves as a director of the company.
  • Jeffrey Bewkes sold 205,681 shares on May 29, pursuant to a Rule 10b5-1 trading plan. Jeffrey Bewkes currently holds 48,010 shares or less than 0.1% of the company. Jeffrey Bewkes is Chairman of the Board and CEO of Time Warner.

Insider selling by calendar month

Here is a table of Time Warner's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
June 2013 21,468 0
May 2013 678,564 0
April 2013 0 0
March 2013 131,915 0
February 2013 739,042 0
January 2013 0 0
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There have been 1,570,989 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on May 1, with the following highlights:

Revenue $6.9 billion
Net income $720 million
Cash $2.5 billion
Debt $19.4 billion
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Outlook

The company expects its 2013 full-year percentage growth rate in Adjusted EPS to be in the low double digits off a 2012 Adjusted EPS base of $3.28.

Competition

Time Warner's competitors include News Corp. (NASDAQ:NWS) and The Walt Disney Company (NYSE:DIS). Here is a table comparing these companies.

Company TWX NWS DIS Industry Average (Entertainment - Diversified)
Market Cap: 55.05B 74.23B 117.78B 381.99M
Employees: 34,000 48,000 166,000 2.90K
Qtrly Rev Growth (yoy): -0.01 0.14 0.10 0.00
Revenue: 28.69B 35.47B 43.76B 667.81M
Gross Margin: 0.46 0.38 0.21 0.38
EBITDA: 7.43B 6.98B 11.35B 22.03M
Operating Margin: 0.23 0.16 0.21 0.01
Net Income: 3.14B 5.92B 5.97B N/A
EPS: 3.25 2.50 3.30 N/A
P/E: 18.12 12.85 19.79 18.54
PEG (5 yr expected): 1.26 N/A 1.49 1.18
P/S: 1.88 2.05 2.65 2.17
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Time Warner's P/S ratio is below the industry average.

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 0.10%. The stock is trading at a P/E ratio of 18.12 and a forward P/E ratio of 13.58. The company has a book value of $32.15 per share and the stock has a dividend yield of 1.98%. 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.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within 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.