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There was intensive insider selling in Westinghouse Air Brake Technologies Corporation (NYSE:WAB) in May when the stock was trading above $55. The stock has already plunged 10% this month.

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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 two stocks that met these three criteria of intensive insider selling in the last 30 days.

1. LinkedIn Corporation (NYSE:LNKD) operates an online professional network.

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Insider selling by insider (last 30 days)

  • Erika Rottenberg sold 8,000 shares on June 5-20 pursuant to a Rule 10b5-1 trading plan. Erika Rottenberg currently holds 68,621 shares and 59,225 options or 0.1% of the company. Erika Rottenberg is Vice President, General Counsel and Secretary.
  • David Sze sold 31,874 shares on June 3-17 pursuant to a Rule 10b5-1 trading plan. David Sze currently holds 280,686 shares or 0.3% of the company. David Sze became a board member of LinkedIn in September 2004.
  • Leslie Kilgore sold 5,000 shares on June 10-18 pursuant to a Rule 10b5-1 trading plan. Leslie Kilgore currently holds 47,644 shares or less than 0.1% of the company. Leslie Kilgore has served on LinkedIn's board of directors since March 2010.
  • Jeff Weiner sold 74,000 shares on June 3-18 pursuant to a Rule 10b5-1 trading plan. Jeff Weiner currently holds 188,826 shares and 1,545,911 options or 1.6% of the company. Jeff Weiner is the CEO of LinkedIn.
  • Michael Gamson sold 8,747 shares on June 17 pursuant to a Rule 10b5-1 trading plan. Michael Gamson currently holds 132,789 shares and 180,483 options or 0.3% of the company. Michael Gamson is Senior Vice President, Global Solutions.
  • Reid Hoffman sold 166,668 shares on June 3-18 pursuant to a Rule 10b5-1 trading plan. Reid Hoffman currently controls 16,656,567 shares or 15.2% of the company. Reid Hoffman is Executive Chairman and a co-founder of LinkedIn.
  • Stanley Meresman sold 1,563 shares on June 13 pursuant to a Rule 10b5-1 trading plan. Stanley Meresman currently controls 25,811 shares and 2,433 options or less than 0.1% of the company. Stanley Meresman became a board member of LinkedIn in October 2010.
  • Steven Sordello sold 20,000 shares on June 10 pursuant to a Rule 10b5-1 trading plan. Steven Sordello currently holds 45,263 shares and 20,000 options or less than 0.1% of the company. Steven Sordello is Senior Vice President and Chief Financial Officer.
  • Kevin Scott sold 6,250 shares on June 10 pursuant to a Rule 10b5-1 trading plan. Kevin Scott currently holds 38,369 shares and 124,999 options or 0.1% of the company. Kevin Scott is Senior Vice President, Engineering.
  • David Henke sold 17,708 shares on June 5 pursuant to a Rule 10b5-1 trading plan. David Henke currently holds 27,215 shares and 88,546 options or 0.1% of the company. David Henke is Senior Vice President, Operations.
  • Deep Nishar sold 11,458 shares on June 5 pursuant to a Rule 10b5-1 trading plan. Deep Nishar currently holds 61,393 shares and 50,000 options or 0.1% of the company. Deep Nishar is Senior Vice President, Products and User Experience.
  • George Battle sold 10,000 shares on June 3 pursuant to a Rule 10b5-1 trading plan. George Battle currently holds 66,833 shares or less than 0.1% of the company. George Battle became a member of LinkedIn's board of directors in February 2010.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
June 2013361,2680
May 2013400,5930
April 2013347,7060
March 2013398,0770
February 2013474,0200
January 2013427,6250

There have been 2,409,289 shares sold and zero shares purchased by the insiders this year.

Financials

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

Revenue$324.7 million
Net income$22.6 million
Cash$830.3 million

Outlook

  • Q2 2013 Guidance: Revenue is expected to range between $342 million and $347 million. Adjusted EBITDA is expected to range between $77 million and $79 million.
  • Full Year 2013 Guidance: Revenue was revised upward by $20 million to range between $1.430 billion and $1.460 billion. Adjusted EBITDA was revised upward by $15 million to range between $330 million and $345 million.

Competition

LinkedIn's competitors include Facebook (NASDAQ:FB) and Monster Worldwide (NYSE:MWW). Here is a table comparing these companies.

CompanyLNKDFBMWWIndustry Average (Internet Information Providers)
Market Cap:19.09B57.87B543.06M2.07B
Employees:3,7794,9005,00020.88K
Qtrly Rev Growth (yoy):0.720.38-0.091.71
Revenue:1.11B5.49B868.63M420.42M
Gross Margin:0.870.730.550.72
EBITDA:149.47M1.31B135.55M32.31M
Operating Margin:0.060.100.080.19
Net Income:39.24M112.00M55.93MN/A
EPS:0.260.05-2.310.37
P/E:670.35520.33N/A21.79
PEG (5 yr expected):2.031.441.100.68
P/S:17.2210.540.634.81

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

My analysis

There have been 12 different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The stock is trading at a P/E ratio of 670.35 and a forward P/E ratio of 82.12. The company has a book value of $9.06 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 high P/S ratio, high P/E ratio and the intensive insider selling activity.

2. PetSmart (NASDAQ:PETM) operates as a specialty retailer of products, services, and solutions for pets in the United States, Puerto Rico, and Canada.

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Insider selling by insider (last 30 days)

  • Jaye Perricone sold 19,652 shares on June 17 and currently holds 9,539 shares and 19,653 options or less than 0.1% of the company. Jaye Perricone is Senior Vice President, Real Estate.
  • Donald Beaver sold 8,647 shares on June 17 and currently holds zero shares of the company. Donald Beaver joined PetSmart in May 2005 as senior vice president and chief information officer.
  • Erick Goldberg sold 6,378 shares on June 14 and currently holds 7,696 options or less than 0.1% of the company. Erick Goldberg is Senior Vice President, Human Resources.
  • John Alpaugh sold 26,953 shares on May 28 - June 7 and currently holds 17,976 shares and 34,842 options or less than 0.1% of the company. John Alpaugh is Senior Vice President, Chief Marketing Officer of the company.
  • Melvin Tucker sold 11,138 shares on June 7 and currently holds 14,694 options or less than 0.1% of the company. Melvin Tucker is Senior Vice President, Finance.
  • Lawrence Molloy sold 9,237 shares on May 31 and currently holds 27,713 options or less than 0.1% of the company. Lawrence Molloy served as the Chief Financial Officer and Executive Vice President of Petsmart from September 30, 2007 and January 30, 2012 respectively to June 3, 2013.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
June 201358,8150
May 201323,1900
April 201364,9640
March 2013173,1820
February 201300
January 201300

There have been 320,151 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter, which ended May 5, financial results on May 22 with the following highlights:

Revenue$1.7 billion
Net income$102.4 million
Cash$260.4 million
Debt$525.6 million

Outlook

  • For 2013, the company anticipates comparable store sales growth of 3% to 4% and total sales growth of 3% to 4%. The company expects earnings per share to be between $3.82 to $3.94.
  • For the second quarter of 2013, the company is expecting comparable store sales growth of 3% to 4%, and earnings per share to be between $0.82 to $0.86.

Competition

PetSmart's competitors include Target (NYSE:TGT) and Wal-Mart Stores (NYSE:WMT). Here is a table comparing these companies.

CompanyPETMTGTWMTIndustry Average (Specialty Retail, Other)
Market Cap:6.95B43.82B243.13B7.96B
Employees:24,000361,0002,200,00024.44K
Qtrly Rev Growth (yoy):0.05-0.010.010.00
Revenue:6.84B73.14B470.34B19.36B
Gross Margin:0.310.290.250.32
EBITDA:902.00M7.64B36.46B1.36B
Operating Margin:0.100.080.060.08
Net Income:397.26M2.80B17.04BN/A
EPS:3.684.265.080.28
P/E:18.2816.0514.6236.36
PEG (5 yr expected):1.101.431.51N/A
P/S:1.020.600.520.50

PetSmart is trading at a higher P/S ratio than its competitors.

My analysis

There have been six 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 0.60%. The stock is trading at a P/E ratio of 18.28 and a forward P/E ratio of 14.84. The company has a book value of $10.18 per share and the stock has a dividend yield of 0.98%. The stock has a $61 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $61 target price. I would place a stop loss at $71, which is the six month 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.

Source: 1 Tech Stock And 1 Pet Store With Recent Intensive Insider Selling