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The technology sector has been the third-worst performing group in one year performance with a gain of 11.6%.

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In this article, I will feature two tech stocks 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. Qualcomm (NASDAQ:QCOM) designs, develops, manufactures, and markets digital telecommunications products and services.

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Insider selling by insider (last 30 days)

  • Donald Rosenberg sold 55,000 shares on June 17 pursuant to a Rule 10b5-1 trading plan. Donald Rosenberg currently controls 14,709 shares or less than 0.1% of the company. Donald Rosenberg is executive vice president, general counsel and corporate secretary of Qualcomm.
  • Matthew Grob sold 21,200 shares on May 28 - June 17 pursuant to a Rule 10b5-1 trading plan. Matthew Grob currently holds 9,902 shares and 24,366 options or less than 0.1% of the company. Matthew Grob is executive vice president of Qualcomm Technologies, and chief technology officer.
  • Steven Mollenkopf sold 8,583 shares on June 11 pursuant to a Rule 10b5-1 trading plan. Steven Mollenkopf currently holds 25,834 shares and 31,251 options or less than 0.1% of the company. Steven Mollenkopf serves as president and chief operating officer of Qualcomm.
  • Margaret Johnson sold 6,000 shares on June 3 pursuant to a Rule 10b5-1 trading plan. Margaret Johnson currently holds 23,942 shares and 11,788 options or less than 0.1% of the company. Margaret Johnson is Executive Vice President of Qualcomm Technologies and president of global market development.
  • Steven Altman sold 50,000 shares on June 3 pursuant to a Rule 10b5-1 trading plan. Steven Altman currently controls 79,926 shares and 69,664 options or less than 0.1% of the company. Steven Altman is vice chairman of Qualcomm and a member of Qualcomm's executive committee.
  • Derek Aberle sold 4,000 shares on June 3 pursuant to a Rule 10b5-1 trading plan. Derek Aberle currently holds 2,264 shares and 27,750 options or less than 0.1% of the company. Derek Aberle serves as executive vice president of Qualcomm, and group president.
  • James Thompson sold 9,791 shares on May 31 and currently holds 9,323 shares or less than 0.1% of the company. James Thompson serves as executive vice president, engineering of Qualcomm Technologies.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
June 2013139,4830
May 2013335,7230
April 2013429,2500
March 2013412,2410
February 2013304,0570
January 2013626,0030

There have been 2,246,757 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the fiscal 2013 second-quarter, which ended March 31, financial results on April 24 with the following highlights:

Revenue$6.1 billion
Net income$1.9 billion
Cash$30.5 billion

Outlook

The company's guidance is as follows:

 Q3/FY13FY13
Revenue$5.8-$6.3 billion$24.0-$25.0 billion
GAAP Diluted EPS$0.80-$0.88$3.78-$3.93

Competition

Qualcomm's competitors include Broadcom (NASDAQ:BRCM), Nokia (NYSE:NOK) and Texas Instruments (NASDAQ:TXN). Here is a table comparing these companies.

CompanyQCOMBRCMNOKTXN
Market Cap:104.83B18.98B14.59B38.76B
Employees:26,60011,30094,31734,151
Qtrly Rev Growth (yoy):0.240.11-0.20-0.08
Revenue:21.64B8.01B37.12B12.59B
Gross Margin:0.620.490.290.49
EBITDA:7.63B1.23B1.40B3.88B
Operating Margin:0.310.10-0.010.21
Net Income:6.23B822.00M-3.17B1.82B
EPS:3.561.43-0.861.62
P/E:17.0223.30N/A21.64
PEG (5 yr expected):0.750.7717.022.66
P/S:4.862.380.383.05

Qualcomm has the highest P/S ratio among these four companies, 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 1.27%. The stock is trading at a P/E ratio of 17.02 and a forward P/E ratio of 12.36. The company has a book value of $21.84 per share and the stock has a dividend yield of 2.31%. The stock has a $58 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $58 target price. I would place a stop loss at $68, which is the 9-year 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.

2. Semtech Corporation (NASDAQ:SMTC) designs, develops, manufactures, and markets analog and mixed signal semiconductor products.

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Insider selling by insider (last 30 days)

  • Mohan Maheswaran sold 8,000 shares on June 4-19 pursuant to a Rule 10b5-1 trading plan. Mohan Maheswaran currently holds 161,662 shares or 0.2% of the company. Mohan Maheswaran joined Semtech as President and Chief Executive Officer in April 2006.
  • Asaf Silberstein sold 2,949 shares on June 14-18 and currently holds 2,337 shares or less than 0.1% of the company. Asaf Silberstein is Vice President, Worldwide Operations.
  • Emeka Chukwu sold 7,000 shares on June 11-18 pursuant to a Rule 10b5-1 trading plan. Emeka Chukwu currently holds 49,370 shares or less than 0.1% of the company. Emeka Chukwu is Senior Vice President and Chief Financial Officer of the company.
  • Glen Antle sold 8,000 shares on June 10-18 pursuant to a Rule 10b5-1 trading plan. Glen Antle currently holds 2,000 options or less than 0.1% of the company. Glen Antle serves as a director of the company.
  • W. Dean Baker sold 5,000 shares on June 17 pursuant to a Rule 10b5-1 trading plan. W. Dean Baker currently holds zero shares of the company. W. Dean Baker serves as a director of the company.
  • Jeffrey Pohlman sold 85,000 shares on May 30 - June 17 and currently holds 136,611 shares or 0.2% of the company. Jeffrey Pohlman is the Executive Vice President And General Manager, Protection & Power and Hi-Rel Products.
  • James Kim sold 4,575 shares on May 31 - June 14 pursuant to a Rule 10b5-1 trading plan. James Kim currently holds 5,495 shares and 13,000 options or less than 0.1% of the company. James Kim was appointed as the Senior Vice President of Worldwide Sales and Marketing on January 26, 2007.
  • Randall Holliday sold 22,646 shares on June 4 and currently holds 5,734 options or less than 0.1% of the company. Randall Holliday joined the company in October 2008 as Vice-President, General Counsel and Secretary.
  • James Lindstrom sold 5,000 shares on May 30 and currently holds 20,000 shares or less than 0.1% of the company. James Lindstrom serves as a director of the company.
  • John Piotrowski sold 5,000 shares on May 30 and currently holds zero shares of the company. John Piotrowski serves as a director of the company.
  • Sameer Vuyyuru sold 5,277 shares on May 28 and currently holds 6,667 options or less than 0.1% of the company. Sameer Vuyyuru is Senior Vice President and General Manager, Advanced Communications Products.
  • Jonathan Hahn sold 8,123 shares on May 28 and currently holds 5,000 options or less than 0.1% of the company. Jonathan Hahn is Chief Information Officer and Vice President of Information Technology.
  • Bruce Edwards sold 5,000 shares on May 28 pursuant to a Rule 10b5-1 trading plan. Bruce Edwards currently holds 7,000 shares or less than 0.1% of the company. Bruce Edwards serves as a director of the company.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
June 2013102,8450
May 201394,9750
April 2013131,7260
March 2013110,0740
February 20138,5000
January 201341,5000

There have been 489,620 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the fiscal 2014 first-quarter, which ended April 28, financial results on June 7 with the following highlights:

Revenue$162.4 million
Net income$14.8 million
Cash$236.4 million
Debt$325.3 million

Outlook

The company's second quarter of fiscal year 2014 outlook is as follows:

  • Net sales are expected to be in the range of $164.0 million to $172.0 million.
  • GAAP earnings are expected to be in the range of 21 to 29 cents per diluted share.
  • Non-GAAP earnings are expected to be in the range of 50 to 56 cents per diluted share.

Competition

Semtech's competitors include Analog Devices (NASDAQ:ADI), STMicroelectronics (NYSE:STM) and Texas Instruments (TXN). Here is a table comparing these companies.

 

 

 

 

CompanySMTCADISTMTXNIndustry Average (Semiconductor - Integrated Circuits)
Market Cap:2.42B13.92B8.09B38.76B151.18M
Employees:1,4339,20048,46034,1518.44K
Qtrly Rev Growth (yoy):0.39-0.02-0.00-0.080.25
Revenue:624.59M2.66B8.48B12.59B969.13M
Gross Margin:0.640.640.320.490.42
EBITDA:147.24M902.91M411.00M3.88B-26.89M
Operating Margin:0.150.30-0.070.21-0.05
Net Income:54.51M644.65M-1.15B1.82BN/A
EPS:0.812.09-1.301.62-0.93
P/E:44.3121.63N/A21.6425.87
PEG (5 yr expected):1.661.97185.402.66N/A
P/S:3.875.180.973.051.33

Semtech's P/S and P/E ratios are above the industry average, which could explain some of the insider selling.

My analysis

There have been 13 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 0.80%. The stock is trading at a P/E ratio of 44.31 and a forward P/E ratio of 13.53. The company has a book value of $10.75 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.

Source: 2 Tech Stocks With Recent Intensive Insider Selling