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There was intensive insider selling in Johnson & Johnson (JNJ) in July/August 2008, when the stock was trading above $70. The stock peaked at $72.76 in September 2008, and plunged all the way to $46.25 in March 2009 or 36.4% below the September 2008 peak.

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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%.

There was intensive insider selling in Johnson & Johnson again in July/August this year. This was the first time since November 2011, that Johnson & Johnson saw intensive insider selling. Three different insiders decreased their holdings by more than 10%:

  • Michael Ullmann sold 16,140 shares on August 5, and currently holds 55,427 shares or less than 0.1% of the company. Michael Ullmann is Vice President, General Counsel of Johnson & Johnson and a member of the Executive Committee.
  • Paulus Stoffels sold 45,440 shares on July 25, and currently holds 16,801 shares or less than 0.1% of the company. Paulus Stoffels is the Chief Scientific Officer, Johnson & Johnson, and Worldwide Chairman, Pharmaceuticals.
  • Dominic Caruso sold 30,000 shares on July 18, and currently holds 53,534 shares or less than 0.1% of the company. Dominic Caruso is Vice President, Finance and Chief Financial Officer of Johnson & Johnson.

Here is a table of Johnson & Johnson's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
August 201316,1400
July 201375,4400
June 201300
May 20134,9290
April 201300
March 201300
February 201300
January 201300

There have been 96,509 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$17.9 billion
Net income$3.8 billion
Cash$25.1 billion
Debt$15.0 billion

Outlook

On July 16 the company increased its earnings guidance for full-year 2013 to $5.40 - $5.47 per share. The company's guidance excludes the impact of special items.

Competition

Johnson & Johnson's competitors include Covidien (COV), Novartis AG (NVS) and Pfizer (PFE). Here is a table comparing these companies.

CompanyJNJCOVNVSPFE
Market Cap:259.43B30.15B179.69B207.19B
Employees:127,60043,400131,00091,500
Qtrly Rev Growth (yoy):0.090.020.01-0.14
Revenue:69.99B12.14B57.96B56.56B
Gross Margin:0.690.570.680.81
EBITDA:22.74B3.33B17.10B24.64B
Operating Margin:0.270.220.210.32
Net Income:12.86B1.90B9.52B11.09B
EPS:4.513.773.863.61
P/E:20.5016.9219.028.09
PEG (5 yr expected):2.711.973.064.06
P/S:3.752.483.113.65

Johnson & Johnson has the highest P/S ratio among these four companies. There was also intensive insider selling in Covidien in August this year and there was intensive insider selling in Pfizer in May this year.

Conclusion

There have been three different insiders selling Johnson & Johnson and there have not been any insiders buying Johnson & Johnson during the past 30 days. All three of these insiders decreased their holdings by more than 10%. Johnson & Johnson has an insider ownership of 0.02%. The stock is trading at a P/E ratio of 20.50 and a forward P/E ratio of 15.87. Johnson & Johnson has a book value of $24.79 per share. Before entering short Johnson & Johnson, 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.

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Source: Insiders Are Selling Johnson & Johnson