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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. McKesson Corporation (NYSE:MCK) delivers pharmaceuticals, medical supplies, and healthcare information technologies to the healthcare industry primarily in the United States.

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Insider selling by insider (last 30 days)

  • Paul Julian sold 84,750 shares on June 18-19 pursuant to a Rule 10b5-1(c) trading plan. Paul Julian currently holds 57 shares or less than 0.1% of the company. Paul Julian is EVP, Group President.
  • David Lawrence sold 7,500 shares on June 14 and currently holds zero shares or less than 0.1% of the company. David Lawrence serves as a director of the company.
  • Jorge Figueredo sold 16,250 shares on June 10-14 pursuant to a Rule 10b5-1(c) trading plan. Jorge Figueredo currently holds 16,250 options or less than 0.1% of the company. Jorge Figueredo is EVP, Human Resources.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
June 2013108,5000
May 2013791,0580
April 2013117,2500
March 2013160,8170
February 2013234,7500
January 201353,7500

There have been 1,466,125 shares sold and there have been zero shares purchased by the insiders this year.

Financials

The company reported the full fiscal year 2013, which ended March 31, financial results on May 7 with the following highlights:

Revenue$122.5 billion
Net income$1.3 billion
Cash$2.5 billion
Debt$4.9 billion

Outlook

McKesson expects adjusted earnings per diluted share from continuing operations between $7.90 and $8.20 for the fiscal year ending March 31, 2014.

Competition

McKesson's competitors include AmerisourceBergen Corporation (NYSE:ABC), Cardinal Health (NYSE:CAH) and Owens & Minor (NYSE:OMI). Here is a table comparing these companies.

CompanyMCKABCCAHOMI
Market Cap:26.23B12.83B16.26B2.14B
Employees:43,50013,40032,5006,500
Qtrly Rev Growth (yoy):-0.030.04-0.090.03
Revenue:122.46B81.38B102.44B8.97B
Gross Margin:0.060.030.050.11
EBITDA:2.90B1.41B2.36B249.99M
Operating Margin:0.020.020.020.02
Net Income:1.34B706.22M1.16B105.03M
EPS:5.592.303.351.67
P/E:20.7024.1414.2120.21
PEG (5 yr expected):1.091.351.281.97
P/S:0.210.160.160.24

McKesson's valuation is in line with 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 0.33%. The stock is trading at a P/E ratio of 20.70 and a forward P/E ratio of 12.67. The company has a book value of $30.61 per share and the stock has a dividend yield of 0.69%. 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. Nexstar Broadcasting Group (NASDAQ:NXST), a television broadcasting and digital media company, focuses on the acquisition, development, and operation of television stations and interactive community Websites in medium-sized markets in the United States.

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Insider selling by insider (last 30 days)

  • Perry Sook sold 300,000 shares on June 19-26 and currently controls 925,956 shares and 2,300,000 options or 11.0% of the company. Perry Sook is Chairman, President and CEO of the company.
  • Martin Pompadur sold 53,000 shares on June 24 and currently holds 4,730 shares or less than 0.1% of the company. Martin Pompadur serves as a director of the company.
  • Brian Jones sold 30,000 shares on June 24 and currently holds 10,500 shares and 170,000 options or 0.6% of the company. Brian Jones became Co-Chief Operating Officer for Nexstar Broadcasting on May 28, 2008.
  • Jay Grossman sold 35,000 shares on June 7-20 and currently holds 50,000 shares or 0.2% of the company. Jay Grossman serves as a director of the company.
  • Timothy Busch sold 50,000 shares on June 19 and currently holds 55,214 shares and 220,000 options or 0.9% of the company. Timothy Busch has served as Co-Chief Operating Officer since May 28, 2008.
  • Lisbeth McNabb sold 15,000 shares on June 17 and currently holds 25,000 options or less than 0.1% of the company. Lisbeth McNabb serves as a director of the company.

Insider selling by calendar month

Here is a table of Nexstar Broadcasting Group's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
June 2013483,0000
May 20133,943,3760
April 201300
March 201384,983184
February 20133,450,0000
January 201300

There have been 7,961,359 shares sold and there have been 184 shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on May 8 with the following highlights:

Revenue$112.2 million
Net income$0.7 million
Net debt$905.3 million

Competition

As a television broadcasting company, Nexstar Broadcasting Group faces a significant level of competition, both directly and indirectly. Generally Nexstar competes for its audience against all the other leisure activities in which one could choose to engage rather than watch television. Specifically, stations Nexstar owns or provides services to compete for audience share, programming and advertising revenue with other television stations in their respective markets and with other advertising media, including newspapers, radio stations, cable television, DBS systems and the Internet.

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 stock is trading at a P/E ratio of 6.38 and a forward P/E ratio of 11.13. The company has a book value of $0.09 per share and the stock has a dividend yield of 1.32%. 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