In this article, I will feature one home furnishing store that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:
- The stock was sold by three or more insiders within one month.
- The stock was not purchased by any insiders in the month of intensive selling.
- At least two sellers decreased their holdings by more than 10%.
Restoration Hardware (RH) engages in the retail of home furnishings.
Insider selling during the last 30 days
Here is a table of Restoration Hardware's insider-trading activity during the last 30 days by insider.
|Name||Title||Trade Date||Shares Sold||Rule 10b5-1||Current Ownership||Decrease In Ownership|
|Eri Chaya||Director||Oct 16||25,000||No||58,045 shares||30.1%|
|Ken Dunaj||COO||Oct 3-4||50,000||No||85,280 shares||37.0%|
|James Chu||Director||Sep 30||3,978,731||No||0 shares||100%|
There have been 4,053,731 shares sold by insiders during the last 30 days. More details about the Rule 10b5-1 trading plan can be found from this link.
Insider selling by calendar month
Here is a table of Restoration Hardware's insider-trading activity by calendar month.
|Month||Insider selling / shares||Insider buying / shares|
There have been 22,999,278 shares sold and there have been 100,000 shares purchased by insiders this year.
Restoration Hardware reported the fiscal 2013 second-quarter, which ended August 3, financial results on September 10 with the following highlights:
|Net loss||$17.8 million|
Restoration Hardware's guidance for the third quarter of fiscal 2013 is as follows:
|Adjusted net income||$11.2-$12.0 million|
|Adjusted diluted EPS||$0.27-$0.29|
Restoration Hardware's guidance for the fourth quarter of fiscal 2013 is as follows:
|Adjusted net income||$34.3-$35.5 million|
|Adjusted diluted EPS||$0.81-$0.84|
Restoration Hardware's guidance for the fiscal year ending February 1, 2014 is as follows:
|Adjusted net income||$67.6-$69.5 million|
|Adjusted diluted EPS||$1.65-$1.70|
Restoration Hardware has the highest P/S ratio among these three companies.
Here is a table of these competitors' insider-trading activities this year.
|Company||Insider buying / shares||Insider selling / shares|
Only Restoration Hardware has seen intensive insider selling during the past 30 days.
There have been three different insiders selling Restoration Hardware and there have not been any insiders buying Restoration Hardware during the past 30 days. All three of these insiders decreased their holdings by more than 10%. Restoration Hardware has an insider ownership of 10.40%.
Restoration Hardware is trading at a forward P/E ratio of 32.70 and the company has a book value of $12.90 per share. Before entering short Restoration Hardware, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are relatively high P/S ratio and the intensive insider selling activity.