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In this article, I will feature one healthcare company 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%.

Actavis (ACT), an integrated specialty pharmaceutical company, engages in developing, manufacturing, marketing, selling, and distributing generic, branded generic, brand, biosimilar, and over-the-counter pharmaceutical products worldwide.

(click to enlarge)

Insider selling during the last 30 days

  • Albert Hummel sold 46,200 shares on August 22 - September 16 and currently holds 82,776 shares or less than 0.1% of the company. Albert Hummel serves as a director of the company. Albert Hummel decreased his holdings by 35.8% during the last 30 days.
  • Fred Wilkinson sold 16,749 shares on September 4 and currently holds 52,469 shares or less than 0.1% of the company. Fred Wilkinson is President, Actavis Specialty Brands. Fred Wilkinson decreased his holdings by 24.2% during the last 30 days.
  • Jack Michelson sold 6,064 shares on September 4 and currently holds 1,877 shares or less than 0.1% of the company. Jack Michelson serves as a director of the company. Jack Michelson decreased his holdings by 76.4% during the last 30 days.
  • David Buchen sold 10,000 shares on August 29 and currently holds 97,373 shares or less than 0.1% of the company. David Buchen is Chief Legal Officer, Global. David Buchen decreased his holdings by 9.3% during the last 30 days.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
September 201329,0130
August 2013196,2710
July 201300
June 201300
May 201300
April 201300
March 201323,9130
February 201300
January 201300

There have been 244,097 shares sold and there have been zero shares purchased by insiders this year.

Financials

Actavis reported the second-quarter financial results on July 25 with the following highlights:

Revenue$2.0 billion
Adjusted EBITDA$474.5 million
Cash$234.9 million
Debt$6.2 billion
Outlook

Actavis' guidance for 2013 is as follows:

  • Total net revenue of approximately $8.1 billion.
  • Adjusted non-GAAP earnings for 2013 is expected to be between $8.15 and $8.50 per diluted share.
  • Adjusted EBITDA for 2013 is expected to be between $1.96 billion and $2.03 billion.

Competition

Actavis' competitors include Mylan (MYL), Novartis AG (NVS) and Teva Pharmaceutical (TEVA). Here is a table comparing these four companies.

CompanyACTMYLNVSTEVA
Market Cap:18.04B14.76B187.10B31.87B
Employees:17,70020,000131,00045,948
Qtrly Rev Growth (yoy):0.470.010.01-0.01
Revenue:6.92B6.86B57.96B20.05B
Gross Margin:0.480.450.680.53
EBITDA:1.57B1.91B17.10B5.61B
Operating Margin:0.120.200.210.20
Net Income:-562.90M657.79M9.52B419.00M
EPS:-4.381.633.860.49
P/E:N/A23.7219.8077.45
PEG (5 yr expected):1.021.403.203.18
P/S:2.662.133.211.58

Actavis has the second highest P/S ratio among these four companies. Mylan has seen six insider sell transactions this year.

Conclusion

There have been four different insiders selling Actavis and there have not been any insiders buying Actavis during the past 30 days. Three of these four insiders decreased their holdings by more than 10%. Actavis has an insider ownership of 0.90%.

Actavis is trading at a forward P/E ratio of 14.42 and the company has a book value of $26.75 per share.

Before entering short Actavis, 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.

Source: Insiders Are Selling Actavis