Insiders Are Selling Best Buy

Sep.23.13 | About: Best Buy (BBY)

In this article, I will feature one electronics store 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%.

Best Buy (NYSE:BBY) operates as an e-commerce and physical retailer of consumer electronics in the United States, Europe, Canada, and China.

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Insider selling during the last 30 days

  • Richard Schulze sold 1,250,000 shares on September 6-10, and currently controls 65,321,965 shares or 19.2% of the company. Richard Schulze decreased his holdings by 1.9% in September.
  • Hubert Joly sold 451,153 shares on September 6, and currently holds 476,628 shares and 350,468 options or 0.2% of the company. Hubert Joly sold his shares due to circumstances relating to his marital dissolution. Hubert Joly is Best Buy's Chief Executive Officer and a member of its Board of Directors. Hubert Joly decreased his holdings by 35.3% in September.
  • Christopher Gould sold 7,225 shares on September 5, and currently holds 14,342 shares or less than 0.1% of the company. Christopher Gould is Vice President, Treasurer. Christopher Gould decreased his holdings by 33.5% in September.
  • Keith Nelsen sold 12,748 shares on September 4, and currently holds 88,283 shares or less than 0.1% of the company. Keith Nelsen was named Executive Vice President, General Counsel in May 2011. Keith Nelsen decreased his holdings by 12.6% in September.
  • Allen Lenzmeier sold 60,000 shares on August 27, and currently controls 753,482 shares or 0.2% of the company. Allen Lenzmeier serves as a director of the company. Allen Lenzmeier decreased his holdings by 7.4% during the last 30 days.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
September 2013 1,721,126 0
August 2013 60,000 0
July 2013 0 0
June 2013 119,577 0
May 2013 15,000 0
April 2013 31,824 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
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There have been 1,947,527 shares sold and there have been zero shares purchased by insiders this year.

Financials

Best Buy reported the fiscal 2014 second-quarter, which ended August 3, financial results on August 20, with the following highlights:

Revenue $9.3 billion
Net income $266 million
Cash $1.9 billion
Debt $1.7 billion
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Competition

Best Buy's competitors include Amazon.com (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Wal-Mart Stores (NYSE:WMT). Here is a table comparing these companies.

Company BBY AMZN AAPL WMT Industry Average (Electronics Stores)
Market Cap: 13.08B 144.53B 424.64B 246.86B 1.84B
Employees: 165,000 88,400 72,800 2,200,000 17.00K
Qtrly Rev Growth (yoy): -0.00 0.22 0.01 0.02 0.11
Revenue: 48.15B 66.85B 169.40B 473.00B 4.19B
Gross Margin: 0.23 0.26 0.38 0.25 0.30
EBITDA: 1.89B 2.92B 55.87B 36.65B 129.68M
Operating Margin: 0.02 0.01 0.29 0.06 0.01
Net Income: -349.27M -101.00M 37.75B 17.09B N/A
EPS: -1.39 -0.23 40.11 5.14 -1.39
P/E: N/A N/A 11.65 14.76 25.69
PEG (5 yr expected): 2.03 10.11 0.67 1.60 1.11
P/S: 0.27 2.16 2.51 0.52 0.27
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Best Buy has the lowest P/S ratio among these four companies.

Here is a table of these competitors' insider-trading activities during the last six months.

Company Insider buying / shares Insider selling / shares
AMZN 0 1,109,955
AAPL 0 221,956
WMT 0 183,315
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None of these three companies have seen any insider buying during the last six months. Only Best Buy has seen intensive insider selling during the last 30 days.

Conclusion

There have been five different insiders selling Best Buy and there have not been any insiders buying Best Buy during the past 30 days. Three of these five insiders decreased their holdings by more than 10%.

Best Buy is trading at a forward P/E ratio of 14.32 and the company has a book value of $10.58 per share. The stock has a dividend yield of 1.78%. There are 11 analyst buy ratings, 11 neutral ratings and two sell ratings with an average price target of $37.85.

Before entering short Best Buy, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are bearish analyst target prices 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.