Insiders Are Selling Wells Fargo

Aug.12.13 | About: Wells Fargo (WFC)

The financial sector has been the best-performing group in one-year performance with a gain of 32.7%.

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In this article, I will feature one bank that has 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%.

Wells Fargo & Company (NYSE:WFC) provides retail, commercial and corporate banking services.

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Insider selling by insiders (last 30 days)

  • Avid Modjtabai sold 60,000 shares on July 31, and currently controls 141,241 shares or less than 0.1% of the company. Avid Modjtabai is Senior Executive Vice President, Consumer Lending at Wells Fargo & Company.
  • David Carroll sold 79,700 shares on July 31 - August 1, and currently holds 215,130 shares or less than 0.1% of the company. David Carroll is Senior Executive Vice President, Wealth, Brokerage and Retirement at Wells Fargo & Company.
  • John Stumpf sold 38,000 shares on July 30, and currently controls 1,232,716 shares or less than 0.1% of the company. John Stumpf is Chairman, President and CEO at Wells Fargo & Company.
  • James Strother sold 10,016 shares on July 26, and currently holds 64,866 shares or less than 0.1% of the company. James Strother is Senior Executive Vice President, General Counsel Legal Group at Wells Fargo & Company.
  • Michael Loughlin sold 70,953 shares on July 26, and currently controls 397,152 shares or less than 0.1% of the company. Michael Loughlin is Senior Executive Vice President, Chief Risk Officer at Wells Fargo & Company.
  • Michael Heid sold 9,842 shares on July 15-29, and currently controls 71,661 shares and 41,140 options or less than 0.1% of the company. Michael Heid is Executive Vice President at Wells Fargo & Company.
  • David Hoyt sold 101,886 shares on July 24, and currently controls 820,790 shares or less than 0.1% of the company. David Hoyt is Senior Executive Vice President, Wholesale Banking at Wells Fargo & Company.
  • Richard Levy sold 75,000 shares on July 15, and currently controls 70,329 shares and 31,920 options or less than 0.1% of the company. Richard Levy is Executive Vice President, Controller at Wells Fargo & Company.

Insider selling by calendar month

Here is a table of Wells Fargo's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
August 2013 39,700 0
July 2013 405,697 0
June 2013 0 0
May 2013 75,000 0
April 2013 287,796 0
March 2013 0 0
February 2013 0 0
January 2013 109,213 0
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There have been 917,406 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 12, with the following highlights:

Revenue $21.4 billion
Net income $5.5 billion
Book value $28.26 per share
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Competition

Wells Fargo's competitors include Bank of America (NYSE:BAC), Citigroup (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM). Here is a table comparing these companies.

Company WFC BAC C JPM Industry Average (Money Center Banks)
Market Cap: 229.21B 155.24B 156.07B 206.22B 29.92B
Employees: 274,300 257,000 253,000 254,063 28.72K
Qtrly Rev Growth (yoy): 0.06 0.07 0.17 0.15 0.25
Revenue: 81.09B 78.11B 63.67B 94.04B 14.95B
Gross Margin: N/A N/A N/A N/A 0.83
EBITDA: N/A N/A N/A N/A 19.69M
Operating Margin: 0.41 0.17 0.19 0.37 0.33
Net Income: 19.78B 5.01B 9.60B 22.90B N/A
EPS: 3.69 0.46 3.11 5.98 1.58
P/E: 11.72 31.62 16.49 9.12 11.66
PEG (5 yr expected): 1.56 0.87 0.68 1.56 1.04
P/S: 2.83 1.99 2.45 2.19 2.26
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Wells Fargo has the highest P/S ratio among these four banks. Bank of America has seen one insider sell transaction this month and JPMorgan has seen intensive insider selling during the past 30 days.

Conclusion

There have been eight different insiders selling Wells Fargo and there have not been any insiders buying Wells Fargo during the past 30 days. Six out of these eight insiders decreased their holdings by more than 10%. Wells Fargo has an insider ownership of 0.06%. The stock is trading at a P/E ratio of 11.72 and a forward P/E ratio of 10.76. Wells Fargo has a book value of $27.98 per share and the stock has a dividend yield of 2.78%. Before entering short Wells Fargo, 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.

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.