Insiders Are Selling EMC

| About: Dell Technologies (DVMT)

There was intensive insider selling in EMC Corporation (EMC) in October 2007, when the stock was trading above $24. The stock peaked at $25.47 in October 2007, and plunged all the way to $8.25 in November 2008 or 67.6% below the October 2007 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 EMC again in July/August this year. Nine different insiders sold their shares:

  • William Scannell sold 150,824 shares on August 9, and currently holds 600,015 shares and 45,860 options or less than 0.1% of the company. William Scannell is President, Global Sales and Customer Operations at EMC Corporation.
  • Arthur Coviello sold 24,216 shares on August 9, and currently holds 437,861 shares or less than 0.1% of the company. Arthur Coviello is Executive Chairman, RSA.
  • Paul Dacier sold 233,590 shares on July 25 - August 1, and currently holds 526,738 shares and 47,597 options or less than 0.1% of the company. Paul Dacier is Executive Vice President and General Counsel of EMC Corporation.
  • Joseph Tucci sold 400,000 shares on July 30 - August 1, and currently holds 1,758,267 shares or less than 0.1% of the company. Joseph Tucci is Chairman of the Board of Directors and Chief Executive Officer of EMC Corporation.
  • Harry You sold 50,085 shares on July 26, and currently controls 281,364 shares or less than 0.1% of the company. Harry You is Executive Vice President, Office of the Chairman.
  • David Strohm sold 20,000 shares on July 25, and currently controls 257,601 shares or less than 0.1% of the company. David Strohm serves as a director of the company.
  • William Teuber sold 100,000 shares on July 25, and currently controls 812,177 shares or less than 0.1% of the company. William Teuber is the Vice Chairman at EMC Corporation.
  • Denis Cashman sold 40,000 shares on July 25, and currently holds 246,814 shares or less than 0.1% of the company. Denis Cashman is Chief Accounting Officer & COO, Finance.
  • David Goulden sold 182,790 shares on July 25, and currently holds 681,809 shares and 64,000 options or less than 0.1% of the company. David Goulden is President and COO of EMC Corporation.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
August 2013 275,040 0
July 2013 926,465 0
June 2013 30,000 0
May 2013 73,758 0
April 2013 70,000 0
March 2013 25,000 0
February 2013 55,498 0
January 2013 0 0
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There have been 1,455,761 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 24, with the following highlights:

Revenue $5.6 billion
Net income $701 million
Cash $11.1 billion
Debt $7.2 billion
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Outlook

The company's guidance is as follows:

  • Consolidated revenues are expected to be $23.5 billion for 2013.
  • Consolidated GAAP earnings per weighted average diluted share are expected to be $1.37 for 2013 and consolidated non-GAAP earnings per weighted average diluted share are expected to be $1.85 for 2013.

Competition

EMC's competitors include Hewlett-Packard (NYSE:HPQ) and International Business Machines (NYSE:IBM). Here is a table comparing these three companies.

Company EMC HPQ IBM
Market Cap: 55.78B 52.12B 205.53B
Employees: 60,000 331,800 434,246
Qtrly Rev Growth (yoy): 0.06 -0.10 -0.03
Revenue: 22.31B 115.57B 102.38B
Gross Margin: 0.63 0.24 0.49
EBITDA: 5.33B 14.00B 26.23B
Operating Margin: 0.19 0.08 0.21
Net Income: 2.78B -13.40B 15.91B
EPS: 1.26 -6.85 14.09
P/E: 21.26 N/A 13.36
PEG (5 yr expected): 1.10 4.58 1.05
P/S: 2.51 0.46 2.02
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EMC has the highest P/S ratio among these three companies. Hewlett-Packard has seen two insider sell transactions this year and IBM has seen 23 insider sell transactions this year.

Conclusion

There have been nine different insiders selling EMC and there have not been any insiders buying EMC during the past 30 days. Seven out of these nine insiders decreased their holdings by more than 10%. EMC has an insider ownership of 0.50%. The stock is trading at a P/E ratio of 21.26 and a forward P/E ratio of 12.73. EMC has a book value of $10.80 per share and the stock has a dividend yield of 1.49%. The stock has a $15 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $15 target price. I would place a stop loss at $30, which is the 52-week high. The three main reasons for the proposed short entry are the bearish Point and Figure chart, 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 EMC 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.