2 Consumer Stocks With Recent Intensive Insider Selling

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 |  Includes: PEP, PG
by: Markus Aarnio

The Consumer Staples Select Sector SPDR ETF (NYSEARCA:XLP) was trading as low as $19.28 in March 2009. The index is currently trading at $41.57 or 115.6% above the low made in March 2009.

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In this article, I will feature two consumer stocks 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 Procter & Gamble Company (NYSE:PG) engages in the manufacture and sale of a range of branded consumer packaged goods.

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Insider selling by insider (last 30 days)

  • Bruce Brown sold 15,000 shares on August 8, and currently controls 43,752 shares and 22,990 options or less than 0.1% of the company. Bruce Brown is Chief Technology Officer.
  • Robert Fregolle sold 11,192 shares on August 5, and currently controls 42,555 shares or less than 0.1% of the company. Robert Fregolle is Global Customer Business Development Officer.
  • Ciserani Giovanni sold 15,548 shares on August 2, and currently controls 25,805 shares or less than 0.1% of the company. Ciserani Giovanni is Group President, P&G Global Fabric and Home Care.

Insider selling by calendar month

Here is a table of Procter & Gamble's insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
August 2013 41,740 0
July 2013 0 0
June 2013 0 0
May 2013 6,810 0
April 2013 152,075 0
March 2013 0 0
February 2013 62,695 0
January 2013 74,684 0
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There have been 338,004 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 June 30, financial results on August 1 with the following highlights:

Revenue $84.2 billion
Net income $11.3 billion
Cash $5.9 billion
Debt $31.5 billion
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Outlook

For fiscal year 2014, P&G expects organic sales growth in the range of three percent to four percent compared to underlying global market growth of about 3.5 percent. All-in sales growth is forecast in the range of one percent to two percent, including a negative foreign exchange impact of approximately two percent.

Core earnings per share are expected to grow in the range of five percent to seven percent, equal to fiscal 2013 growth at the low end of the range and within the company's long-term, annual growth objectives at the high end of the range. P&G noted that EPS growth estimates include a six percentage point negative impact from foreign exchange. Reported earnings per share are expected to grow in the range of seven percent to nine percent, reflecting somewhat lower non-core restructuring costs in fiscal year 2014 versus the prior year.

Competition

Procter & Gamble's competitors include Johnson & Johnson (NYSE:JNJ) and Kimberly-Clark Corporation (NYSE:KMB). Here is a table comparing these companies.

Company PG JNJ KMB
Market Cap: 231.93B 259.43B 37.78B
Employees: N/A 127,600 58,000
Qtrly Rev Growth (yoy): 0.02 0.09 0.00
Revenue: 84.17B 69.99B 21.14B
Gross Margin: 0.50 0.69 0.34
EBITDA: 17.77B 22.74B 4.27B
Operating Margin: 0.18 0.27 0.16
Net Income: 11.31B 12.86B 1.84B
EPS: 3.86 4.51 4.70
P/E: 21.15 20.50 20.95
PEG (5 yr expected): 2.36 2.71 2.22
P/S: 2.77 3.75 1.79
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Procter & Gamble 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. All three of these insiders decreased their holdings by more than 10%. The company has an insider ownership of 0.10%. The stock is trading at a P/E ratio of 21.15 and a forward P/E ratio of 17.45. The company has a book value of $22.56 per share and the stock has a dividend yield of 2.95%. 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. PepsiCo (NYSE:PEP) operates as a food and beverage company worldwide.

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Insider selling by insider (last 30 days)

  • Marie Gallagher sold 33,998 shares on July 31, and currently holds 34,014 shares or less than 0.1% of the company. Marie Gallagher is Senior Vice President and Controller.
  • Daniel Vasella sold 4,414 shares on July 26, and currently holds 37,899 shares or less than 0.1% of the company. Daniel Vasella serves as a director of the company.
  • Cynthia Trudell sold 51,937 shares on July 26, and currently holds 91,749 shares or less than 0.1% of the company. Cynthia Trudell is executive vice president, Human Resources and chief HR officer of PepsiCo.
  • James Schiro sold 3,540 shares on July 26, and currently holds 45,392 shares or less than 0.1% of the company. James Schiro serves as a director of the company.
  • Thomas Greco sold 22,353 shares on July 26, and currently holds 88,916 shares and 28,372 options or less than 0.1% of the company. Thomas Greco is president, Frito-Lay North America, a unit of PepsiCo.
  • Albert Carey sold 54,466 shares on July 26, and currently holds 161,425 shares or less than 0.1% of the company. Albert Carey is chief executive officer of PepsiCo Americas Beverages, a unit of PepsiCo.
  • Saad Abdul-Latif sold 55,464 shares on July 26, and currently holds 166,587 shares or less than 0.1% of the company. Saad Abdul-Latif is Chief Executive Officer of PepsiCo Asia, Middle East and Africa.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
July 2013 226,172 0
June 2013 0 0
May 2013 0 0
April 2013 0 0
March 2013 6,300 0
February 2013 262,104 1,000
January 2013 0 0
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There have been 494,576 shares sold and there have been 1,000 shares purchased by the insiders this year.

Financials

The company reported the second-quarter financial results on July 24, with the following highlights:

Revenue $16.8 billion
Net income $2.0 billion
Cash $7.8 billion
Debt $8.1 billion
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Outlook

The company expects 7% core constant currency EPS growth versus its fiscal 2012 core EPS of $4.10.

Competition

PepsiCo's competitors include The Coca-Cola Company (NYSE:KO), Dr Pepper Snapple Group (NYSE:DPS) and Mondelez International (NASDAQ:MDLZ). Here is a table comparing these companies.

Company PEP KO DPS MDLZ
Market Cap: 130.07B 178.04B 9.54B 57.39B
Employees: 278,000 150,900 19,000 110,000
Qtrly Rev Growth (yoy): 0.02 -0.03 -0.01 -0.35
Revenue: 65.99B 47.58B 6.00B 35.16B
Gross Margin: 0.53 0.60 0.58 0.37
EBITDA: 12.42B 13.13B 1.29B 4.91B
Operating Margin: 0.15 0.23 0.18 0.11
Net Income: 6.64B 8.60B 610.00M 1.91B
EPS: 4.25 1.90 2.93 1.32
P/E: 19.87 21.15 16.01 24.38
PEG (5 yr expected): 2.33 2.42 2.03 1.86
P/S: 1.98 3.75 1.60 1.66
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PepsiCo has the second highest P/S ratio among these four companies.

My analysis

There have been seven different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. Six out of these seven insiders decreased their holdings by more than 10%. The company has an insider ownership of 0.20%. The stock is trading at a P/E ratio of 19.87 and a forward P/E ratio of 17.84. The company has a book value of $14.64 per share and the stock has a dividend yield of 2.69%. 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.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within 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.