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The basic materials sector has been the worst-performing group year to date with a loss of 5.6%.

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In this article, I will feature two basic materials 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. Oasis Petroleum (NYSE:OAS), an independent exploration and production company, engages in the acquisition and development of oil and natural gas resources in the Montana and North Dakota regions of the Williston Basin.

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Insider selling by insider (last 30 days)

  • William Cassidy sold 2,000 shares on June 18, and currently holds 14,150 shares or less than 0.1% of the company. William Cassidy has served as a director since September 2010.
  • Douglas Swanson sold 7,200 shares on June 13, and currently holds 8,950 shares or less than 0.1% of the company. Douglas Swanson has served as a director since the company's inception in March 2007.
  • Michael Lou sold 35,000 shares on June 12, and currently holds 125,180 shares or 0.1% of the company. Michael Lou has served as Chief Financial Officer and Executive Vice President since August 2011.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
June 201369,2000
May 201325,0000
April 201325,0000
March 201300
February 201325,0000
January 201350,0000

There have been 194,200 shares sold and there have been zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on May 7, with the following highlights:

Revenue$248.3 million
Net income$51.9 million
Cash$191.9 million
Debt$1.2 billion
Production30,153 boe/d

Outlook

Oasis Petroleum expects that the pace of gross operated completions will decline to 18 to 20 wells during the second quarter of 2013, as the company manages the logistics of pad drilling operations and spring break-up. Along with that, the company expects volumes in the second quarter to be relatively flat compared to the first quarter, and the company currently expects second-quarter production to range between 29,000 Boepd and 31,000 Boepd. Additionally, the company increased its full-year guidance to 31,000 Boepd to 34,000 Boepd.

Competition

Oasis Petroleum's competitors include Marathon Oil Corporation (NYSE:MRO) and SM Energy Company (NYSE:SM). Here is a table comparing these companies.

CompanyOASMROSM
Market Cap:3.83B25.40B4.21B
Employees:2943,367725
Qtrly Rev Growth (yoy):0.790.020.30
Revenue:796.41M15.81B1.64B
Gross Margin:0.800.680.71
EBITDA:615.46M9.31B967.90M
Operating Margin:0.470.38-0.02
Net Income:188.80M1.55B-63.86M
EPS:2.042.18-0.97
P/E:20.0516.44N/A
PEG (5 yr expected):0.472.370.77
P/S:4.801.612.57

Oasis Petroleum has the highest P/S ratio among these three companies.

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 4.20%. The stock is trading at a P/E ratio of 20.05 and a forward P/E ratio of 12.05. The company has a book value of $9.19 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 the relatively high P/S ratio and the intensive insider selling activity.

2. U.S. Silica Holdings (NYSE:SLCA) engages in the mining, processing, and sale of commercial silica in the United States.

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Insider selling by insider (last 30 days)

  • John Blanchard sold 1,573 shares on June 17, pursuant to a 10b5-1 plan. John Blanchard currently holds 11,146 shares or less than 0.1% of the company. John Blanchard joined U.S. Silica in 2011 as Vice President and General Manager, Industrials and Specialties.
  • Bradford Casper sold 16,250 shares on June 12-14, pursuant to a 10b5-1 plan. Bradford Casper currently holds 9,000 shares and 37,097 options or less than 0.1% of the company. Bradford Casper has served as Vice President of Strategic Planning since May 2011.
  • Brian Slobodow sold 60,000 shares on June 13, pursuant to a 10b5-1 plan. Brian Slobodow currently holds 147,072 options or 0.3% of the company. Brian Slobodow has served as a member of the Board since March 2011.
  • Jason Tedrow sold 3,400 shares on June 12, pursuant to a 10b5-1 plan. Jason Tedrow currently holds 15,000 shares or less than 0.1% of the company. Jason Tedrow has served as Vice President of Supply Chain since January 2012.
  • David Murry sold 1,133 shares on June 12, pursuant to a 10b5-1 plan. David Murry currently holds 5,250 shares or less than 0.1% of the company. David Murry joined U.S. Silica in 2011, as Vice President of Talent Management and Chief Human Resources Officer.
  • Ggc Opportunity Fund Management Gp, Ltd. sold 13,800,000 shares on June 11, and currently controls 17,601,471 shares or 33.3% of U.S. Silica.

Insider selling by calendar month

Here is a table of U.S. Silica's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
June 201313,882,3560
May 201300
April 201300
March 20139,775,0000
February 201300
January 201300

There have been 23,657,356 shares sold and there have been zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on April 30, with the following highlights:

Revenue$122.3 million
Net income$17.3 million
Cash$42.9 million
Debt$265.4 million

Outlook

The company expects revenues of approximately $132 million to $140 million and adjusted EBITDA of between $39 million and $42 million in the second quarter of 2013. For the full year, 2013, the company reaffirmed its guidance for adjusted EBITDA in the range of $165 million to $175 million and capital expenditures of between $50 and $60 million.

Competition

Both of U.S. Silica's reporting segments operate in highly competitive markets that are characterized by a small number of large, national producers and a larger number of small, regional or local producers. According to a January 2013 publication by the United States Geological Survey, in 2012, there were 87 producers of commercial silica with a combined 159 active operations in 33 states within the United States. Competition in the industry across both of U.S. Silica's reporting segments is based on price, consistency and quality of product, site location, distribution capability, customer service, reliability of supply, breadth of product offering and technical support. As transportation costs are a significant portion of the total cost to customers of commercial silica, in many instances transportation costs can represent more than 50% of delivered cost, the commercial silica market is typically local, and competition from beyond the local area is limited. Notable exceptions to this are the frac sand and fillers and extenders markets, where certain product characteristics are not available in all deposits and not all plants have the requisite processing capabilities, necessitating that some products be shipped for extended distances.

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 33.30%. The stock is trading at a P/E ratio of 14.82 and a forward P/E ratio of 10.06. The company has a book value of $4.75 per share and the stock has a dividend yield of 2.30%. The stock has a $12 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $12 target price. I would place a stop loss at $28.50, which is the all time high. The two main reasons for the proposed short entry are bearish Point and Figure chart and the intensive insider selling activity.

Source: 2 Basic Materials Stocks With Recent Intensive Insider Selling