2 Tech Stocks With Recent Intensive Insider Selling

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 |  Includes: ORCL, XLNX
by: Markus Aarnio

The technology sector has been the third-worst performing group over the recent six-month period with a gain of 8.1%.

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For this article, I screened for technology stocks that 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 technology sector stocks that met these three criteria of intensive insider selling in the last 30 days.

1. Oracle Corporation (NYSE:ORCL) develops, manufactures, markets, hosts, and supports database and middleware software, applications software, and hardware systems.

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Insider selling by insider (last 30 days)

  • Safra Catz sold 2,960,000 shares on July 15-17, pursuant to a Rule 10b5-1 plan. Safra Catz currently holds 12,535 shares or less than 0.1% of the company. Safra Catz has been President of Oracle Corporation since January 2004, a member of the Board of Directors since October 2001, and Chief Financial Officer as of April 2011.
  • Hector Garcia-Molina sold 2,500 shares on July 15, pursuant to a Rule 10b5-1 plan. Hector Garcia-Molina currently holds 5,000 shares and 40,000 options or less than 0.1% of the company. Hector Garcia-Molina has served as a member of Oracle's Board of Directors since 2001.
  • Dorian Daley sold 50,000 shares on June 27, pursuant to a Rule 10b5-1 plan. Dorian Daley currently holds 5,000 shares and 150,000 options or less than 0.1% of the company. Dorian Daley serves as Senior Vice President, General Counsel, and Secretary of Oracle Corporation.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
July 2013 2,962,500 0
June 2013 552,500 0
May 2013 2,909 0
April 2013 52,917 0
March 2013 527,917 0
February 2013 2,917 0
January 2013 42,917 0
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There have been 4,144,577 shares sold and there have been zero shares purchased by the insiders this year.

Financials

The company reported the fiscal 2013 fourth-quarter, which ended May 31, financial results on June 20, with the following highlights:

Revenue $10.9 billion
Net income $3.8 billion
Cash $32.2 billion
Debt $18.5 billion
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Outlook

The company's guidance for the fiscal 2014 first quarter is as follows:

  • New software license and cloud subscription revenue is expected to range from 0% to 8% in constant currency in non-GAAP and 1% to 9% in GAAP. Hardware product revenue growth is expected to range from a negative 6% to positive 2% in constant currency and as a result total revenue growth on a GAAP and non-GAAP basis is expected to range from 3% to 6% in constant dollars.
  • Non-GAAP EPS is expected to be somewhere between $0.56 and $0.59 in constant dollars. GAAP EPS is expected to be somewhere between $0.42 and $0.45 in constant dollar.

Competition

Here is a table of software companies ranked by sales.

Software Companies Ranked By Sales
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Company Symbol Price Change Market Cap P/E
Microsoft Corporation MSFT 31.62 0.01 263.33B 12.26
IBM Software Private - View Profile
Oracle Corporation ORCL 32.54 0.01 150.69B 14.40
SAP AG SAP 73.69 -0.00 87.91B 22.96
CA Technologies CA 29.68 -0.00 13.45B 12.97
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Oracle is ranked No. 3 in sales.

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 23.68%. The stock is trading at a P/E ratio of 14.40 and a forward P/E ratio of 10.31. The company has a book value of $9.54 per share and the stock has a dividend yield of 1.48%. The stock has a $24 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $24 price target. I would place a stop loss at $35, which is the three-month high. The two main reasons for the proposed short entry are bearish Point and Figure chart and the intensive insider selling activity.

2. Xilinx (NASDAQ:XLNX) designs and develops programmable devices and associated technologies worldwide.

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Insider selling by insider (last 30 days)

  • Vincent Tong sold 127,250 shares on July 23-26, and currently holds 38,048 shares or less than 0.1% of the company. Vincent Tong serves as senior vice president of worldwide quality and new product introductions, and executive leader for the company's Asia Pacific region.
  • Moshe Gavrielov sold 390,000 shares on July 22-24, pursuant to a Rule 10b5-1 trading plan. Moshe Gavrielov currently holds 95,850 shares and 134,965 options or less than 0.1% of the company. Moshe Gavrielov serves as president and CEO of Xilinx.
  • Krishna Rangasayee sold 58,000 shares on July 22, pursuant to a Rule 10b5-1 trading plan. Krishna Rangasayee currently holds 13,283 shares and 10,000 options or less than 0.1% of the company. Krishna Rangasayee is senior vice president and general manager for the communications business unit.
  • Raja Petrakian sold 33,125 shares on July 22, and currently holds 19,892 shares and 71,875 options or less than 0.1% of the company. Raja Petrakian serves as senior vice president of worldwide operations.
  • Scott Hover-Smoot sold 20,000 shares on July 22, and currently holds 11,412 shares or less than 0.1% of the company. Scott Hover-Smoot serves as vice president, general counsel and secretary.
  • Frank Tornaghi sold 48,169 shares on July 12-18, pursuant to a Rule 10b5-1 trading plan. Frank Tornaghi currently holds 11,210 shares or less than 0.1% of the company. Frank Tornaghi serves as senior vice president of worldwide sales.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
July 2013 676,544 0
June 2013 18,750 0
May 2013 73,558 0
April 2013 3,640 0
March 2013 22,390 0
February 2013 48,640 0
January 2013 56,653 0
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There have been 900,175 shares sold and there have been zero shares purchased by the insiders this year.

Financials

The company reported the fiscal 2014 first-quarter, which ended June 29, financial results on July 17 with the following highlights:

Revenue $579.0 million
Net income $157.0 million
Cash $1.8 billion
Debt $926.8 million
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Outlook

The company's guidance for the fiscal 2014 second quarter is as follows:

  • Sales are expected to be flat to up 3% sequentially.
  • Gross margin is expected to be approximately 69%.
  • Operating expenses are expected to be approximately $225 million, including $2 million of amortization of acquisition-related intangibles.
  • Other income and expenses are expected to be a net expense of approximately $9 million.

Competition

Xilinx's competitors include Altera Corp. (NASDAQ:ALTR) and Lattice Semiconductor Corporation (NASDAQ:LSCC). Here is a table comparing these companies.

Company XLNX ALTR LSCC
Market Cap: 12.20B 11.20B 581.66M
Employees: 3,329 3,129 739
Qtrly Rev Growth (yoy): -0.01 -0.09 0.20
Revenue: 2.16B 1.77B 292.62M
Gross Margin: 0.67 0.69 0.54
EBITDA: 682.14M 588.99M 33.84M
Operating Margin: 0.28 0.31 0.04
Net Income: 514.73M 499.99M -2.42M
EPS: 1.88 1.56 -0.02
P/E: 24.52 22.43 N/A
PEG (5 yr expected): 2.14 2.05 2.10
P/S: 5.67 6.23 2.09
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Xilinx has the second highest P/S ratio among these three companies.

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 0.10%. The stock is trading at a P/E ratio of 24.52 and a forward P/E ratio of 18.60. The company has a book value of $11.70 per share and the stock has a dividend yield of 2.17%. 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.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in ORCL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.