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The service sector has been the second-best performing group year to date with a gain of 15.2%.

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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. Whole Foods Market (NASDAQ:WFM) owns and operates a chain of natural and organic foods supermarkets.

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Insider selling by insider (last 30 days)

  • Laura Derba sold 2,000 shares on June 5 and currently holds 3,500 options or less than 0.1% of the company. Laura Derba is President, North Atlantic Region.
  • Ralph Sorenson sold 8,000 shares on June 3-4 and currently holds 57,800 shares or less than 0.1% of the company. Ralph Sorenson has served as a director of the company since 1994.
  • David Lannon sold 5,622 shares on June 4 and currently holds six shares or less than 0.1% of the company. David Lannon is Executive Vice President, Operations.
  • Michael Bashaw sold 6,836 shares on June 3 and currently holds 672 shares and 4,000 options or less than 0.1% of the company. Michael Bashaw is President, Midwest Region.
  • Joseph Rogoff sold 6,148 shares on May 31 and currently holds 12,164 options or less than 0.1% of the company. Joseph Rogoff is President, Pacific Northwest Region.
  • John Mackey sold 200,000 shares on May 31 and currently holds 1,028,516 shares or 0.3% of the company. John Mackey is Co-Chief Executive Officer of the company.

Insider selling by calendar month

Here is a table of Whole Foods Market's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
June 201322,4580
May 2013412,5040
April 201300
March 2013100,0002,939
February 201316,4710
January 201300

The month of May has seen the most insider selling. The company had a two-for-one stock split on May 29.

Financials

The company reported the fiscal 2013 second-quarter, which ended April 14, financial results on May 7 with the following highlights:

Revenue$3.0 billion
Net income142 million
Cash$1.1 billion
Debt$27.0 million

Outlook

Based on its year-to-date results and updated assumptions on May 7, the company narrowed its comparable and identical store sales growth ranges for the fiscal year, and raised its EPS range to $2.86 to $2.89. On a 52-week to 52-week basis, the company now expects sales growth of 12% to 14% and diluted earnings per share growth of 15% to 17%.

Competition

Whole Foods Market's competitors include The Kroger Co. (NYSE:KR). Here is a table comparing these two companies.

CompanyWFMKRIndustry Average (Grocery Stores)
Market Cap:19.16B17.79B15.85B
Employees:53,100343,000151.00K
Qtrly Rev Growth (yoy):0.130.030.15
Revenue:12.52B97.73B32.84B
Gross Margin :0.360.210.24
EBITDA:1.17B4.52B2.26B
Operating Margin:0.070.030.04
Net Income:517.57M1.53BN/A
EPS:1.392.901.81
P/E:37.0711.9026.72
PEG (5 yr expected):1.951.431.82
P/S:1.510.180.38

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

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 37.07 and a forward P/E ratio of 29.57. The company has a book value of $9.80 per share and the stock has a dividend yield of 0.79%. 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.

2. Orbitz Worldwide (NYSE:OWW) operates as an online travel company worldwide. It enables leisure and business travelers to research, plan, and book a range of travel products and services.

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Insider selling by insider (last 30 days)

  • Christopher Orton sold 3,710 shares on June 20 pursuant to a Rule 10b5-1 trading plan. Christopher Orton currently holds 79,381 shares or less than 0.1% of the company. Christopher Orton is President, Orbitz.com.
  • Samuel Fulton sold 4,500 shares on June 17 pursuant to a Rule 10b5-1 trading plan. Samuel Fulton currently holds 108,221 shares or 0.1% of the company. Samuel Fulton has served as Senior Vice President, Global Product Strategy, since July 2011.
  • Tamer Tamar sold 109,781 shares on June 14-17 pursuant to a Rule 10b5-1 trading plan. Tamer Tamar currently holds 22,462 shares or less than 0.1% of the company. Tamer Tamar has served as SVP of international and President of ebookers since October 2010.
  • Thomas Kram sold 2,527 shares on June 14 and currently holds 7,539 shares or less than 0.1% of the company. Thomas Kram is GVP, Chief Accounting Officer.
  • Mark Britton sold 10,959 shares on June 13 and currently holds 67,730 shares or less than 0.1% of the company. Mark Britton is a director on the board of Orbitz Worldwide.
  • Kenneth Esterow sold 41,900 shares on May 29 - June 13 and currently holds 62,966 shares or less than 0.1% of the company. Kenneth Esterow is a director on the board of Orbitz Worldwide.
  • Kristina Leslie sold 13,671 shares on June 13 and currently holds 66,676 shares or less than 0.1% of the company. Kristina Leslie is a director on the board of Orbitz Worldwide.
  • Jaynie Studenmund sold 27,397 shares on June 13 and currently holds 175,299 shares or 0.2% of the company. Jaynie Studenmund is a director on the board of Orbitz Worldwide.
  • Jeff Clarke sold 216,076 shares on May 29 and currently holds 319,398 shares or 0.3% of the company. Jeff Clarke has served as a member of the board since June 2007 and is Chairman of the board.
  • Martin Brand sold 25,000 shares on May 29 and currently holds zero shares of the company. Martin Brand is a director on the board of Orbitz Worldwide.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
June 2013185,6960
May 2013795,0470
April 2013207,9100
March 2013296,3160
February 201378,2100
January 201333,7100

There have been 1,596,889 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on May 9 with the following highlights:

Revenue$202.9 million
Net income$146.2 million
Cash$219.8 million
Debt$450.0 million

Net income was $146.2 million for the first quarter 2013 due to the release of a $157.5 million valuation allowance related to the company's U.S. federal deferred tax assets.

Outlook

For the second quarter 2013, the company expects:

• Net revenue in the range of $214 million to $220 million; and

• Adjusted EBITDA between $35 million and $39 million.

For the full year 2013, the company expects:

• Net revenue growth in the range of four percent to seven percent; and

• Adjusted EBITDA growth between five percent and ten percent.

Competition

Orbitz Worldwide's competitors include Expedia (NASDAQ:EXPE) and priceline.com (NASDAQ:PCLN). Here is a table comparing these companies.

CompetitionOWWEXPEPCLNIndustry Average (General Entertainment)
Market Cap:803.56M7.72B40.53B28.43B
Employees:1,32812,3307,90089.70K
Qtrly Rev Growth (yoy):0.070.240.260.10
Revenue:791.88M4.23B5.53B15.39B
Gross Margin:0.810.780.790.34
EBITDA:106.47M640.84M1.98B3.37B
Operating Margin:0.070.120.350.03
Net Income:-149.03M177.88M1.48BN/A
EPS:-1.411.2828.881.90
P/E:N/A44.5628.0319.35
PEG (5 yr expected):0.511.761.391.41
P/S:1.011.837.331.85

Orbitz Worldwide's P/S ratio is below the industry average.

My analysis

There have been 10 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 1.90%. The stock is trading at a forward P/E ratio of 21.65 and the company has a book value of $0.13 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 Service-Sector Companies With Recent Intensive Insider Selling