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The financial sector has been the best-performing group in one-year performance with a gain of 42.4%.

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In this article, I will feature two financial 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. The Goldman Sachs Group (NYSE:GS) provides investment banking, securities, and investment management services, as well as financial services to corporations, financial institutions, governments, and high-net-worth individuals worldwide.

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Insider selling by insider (last 30 days)

  • Michael Sherwood sold 19,338 shares on July 17 and currently holds 112,048 shares or less than 0.1% of the company. Michael Sherwood has been a Vice Chairman of Goldman Sachs since February 2008 and Co-Chief Executive Officer of Goldman Sachs International since 2005.
  • James Johnson sold 9,000 shares on July 17 and currently holds zero shares of the company. James Johnson serves as a director of the company.
  • Debora Spar sold 200 shares on July 17 and currently holds 800 shares or less than 0.1% of the company. Debora Spar serves as a director of the company.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
July 201328,5380
June 201300
May 201300
April 201300
March 201300
February 201357,0000
January 201300

There have been 85,538 shares sold and there have been zero shares purchased by the insiders this year.

Financials

The company reported the second-quarter financial results on July 16 with the following highlights:

Revenue$8.6 billion
Net income$1.9 billion
Book value$151.21 per share
Tangible book value$141.62 per share

Outlook

Harvey M. Schwartz, EVP and CFO, commented on July 16:

"Now in closing, we are cautiously optimistic about the outlook for the operating environment. Nevertheless, we remain vigilant regarding expenses and risks. Given the dynamic nature of the marketplace it's natural for people to become somewhat short-term focused. However, everyone at Goldman Sachs remains keenly aware that our success will be measured over years as opposed to weeks or months."

Competition

Goldman Sachs's competitors include JPMorgan Chase & Co. (NYSE:JPM) and Morgan Stanley (NYSE:MS). Here is a table comparing these companies.

CompanyGSJPMMS
Market Cap:77.42B212.00B54.33B
Employees:31,700254,06355,610
Qtrly Rev Growth (yoy):0.300.15N/A
Revenue:36.29B94.04B28.94B
Gross Margin:0.92N/A0.88
Operating Margin:0.370.370.20
Net Income:8.31B22.90B1.37B
EPS:16.455.980.65
P/E:10.059.3742.95
PEG (5 yr expected):1.951.601.26
P/S:2.142.271.88

Goldman Sachs has the second 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 0.10%. There are eight analyst buy ratings, 18 neutral ratings and two sell ratings with an average target price of $163.58. The stock is trading at a P/E ratio of 10.05 and a forward P/E ratio of 10.54. The company has a book value of $151.21 per share and the stock has a dividend yield of 1.21%. The stock has a $130 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with a $141.62 price target, which is the tangible book value. I would place a stop loss at $168.20, which is the 52-week high. The three main reasons for the proposed short entry are bearish Point and Figure chart, bearish analyst target prices and the intensive insider selling activity.

2. JPMorgan Chase & Co., a financial holding company, provides various financial services worldwide.

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Insider selling by insider (last 30 days)

  • Matthew Zames sold 3,412 shares on July 23 and currently holds 190,289 shares or less than 0.1% of the company. Matthew Zames is Chief Operating Officer.
  • Mary Erdoes sold 29,000 shares on July 19 and currently holds 246,735 shares or less than 0.1% of the company. Mary Erdoes is Asset Management CEO.
  • Ashley Bacon sold 16,693 shares on July 19 and currently holds 4,620 shares or less than 0.1% of the company. Ashley Bacon is Chief Risk Officer.
  • Michael Cavanagh sold 20,000 shares on July 15 and currently holds 262,775 shares or less than 0.1% of the company. Michael Cavanagh is Corporate & Investment Bank Co-CEO.
  • Marianne Lake sold 8,940 shares on July 16 and currently holds 1,784 shares or less than 0.1% of the company. Marianne Lake is Chief Financial Officer.
  • John Hogan sold 18,934 shares on July 17 and currently holds 103,081 shares or less than 0.1% of the company. John Hogan is Chairman of Risk.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
July 201396,9790
June 201300
May 201315,668301,477
April 201375,000436,859
March 201300
February 201334,0000
January 201391,5856,750

There have been 313,232 shares sold and there have been 745,086 shares purchased by the insiders this year.

Financials

The company reported the second-quarter financial results on July 12 with the following highlights:

Revenue$26.0 billion
Net income$6.5 billion
Book value$52.54 per share
Tangible book value$40.04 per share

Outlook

The company's guidance is as follows:

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Competition

JPMorgan's competitors include Bank of America Corporation (NYSE:BAC), Barclays (NYSE:BCS) and Citigroup (NYSE:C). Here is a table comparing these companies.

CompanyJPMBACBCSCIndustry Average (Money Center Banks)
Market Cap:212.00B158.25B60.14B158.77B31.33B
Employees:254,063257,158139,200253,00028.72K
Qtrly Rev Growth (yoy):0.150.01-0.160.160.25
Revenue:94.04B78.11B33.95B63.67B15.17B
Operating Margin:0.370.150.100.190.34
Net Income:22.90B5.01B-1.67B9.60BN/A
EPS:5.980.46-0.553.111.62
P/E:9.3731.81N/A16.7711.86
PEG (5 yr expected):1.600.890.840.681.19
P/S:2.252.031.772.492.38

JPMorgan's P/S ratio is in line with the industry average.

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 9.37 and a forward P/E ratio of 9.21. The company has a book value of $52.54 per share and the stock has a dividend yield of 2.71%. 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.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in GS 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.

Source: 2 Financial Sector Majors With Recent Intensive Insider Selling