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In this article, I will feature one tech stock 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%.

Microsoft (NASDAQ:MSFT) develops, licenses, and supports software, services, and hardware devices worldwide.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Microsoft'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
Bradford Smith EVP Nov 6 200,000 No 906,914 shares 18.1%
Tami Reller EVP Nov 1 5,800 Yes 547,635 shares 1.0%
William Gates Director Oct 28-Nov 1 20,000,000 Yes 357,989,165 shares 5.3%
Anthony Bates EVP Oct 17-31 87,969 Yes 601,723 shares 12.8%
Frank Brod CAO Oct 28 20,000 No 129,385 shares 13.4%

There have been 20,313,769 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 Microsoft's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
November 2013 7,253,200 0
October 2013 13,066,369 0
September 2013 20,247,780 0
August 2013 5,800 0
July 2013 0 0
June 2013 0 0
May 2013 0 0
April 2013 20,010,000 0
March 2013 0 0
February 2013 15,522,222 0
January 2013 4,548,121 0

There have been 80,653,492 shares sold and there have been zero shares purchased by insiders this year.

Financials

Microsoft reported the fiscal 2014 first-quarter, which ended September 30, financial results on October 24 with the following highlights:

Revenue $18.5 billion
Net income $5.2 billion
Cash and investments $80.7 billion
Debt $15.9 billion

(Source: Microsoft earnings presentation)

Outlook

Microsoft's guidance for the fiscal 2014 second quarter is as follows:

Devices and Consumer Licensing Revenue $5.2-$5.4 billion
Devices and Consumer Hardware Revenue $3.8-$4.1 billion
Devices and Consumer Other Revenue $1.7-$1.8 billion
Commercial Licensing Revenue $10.7-$10.9 billion
Commercial Other Revenue $1.7-$1.9 billion

(click to enlarge)

(Source: Microsoft earnings presentation)

Competition

Microsoft's competitors include Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), and Oracle (NYSE:ORCL). Here is a table comparing these companies.

Company MSFT AAPL GOOG ORCL Industry Average (Business Software & Services)
Market Cap: 315.39B 468.37B 339.44B 156.55B 350.78M
Employees: 99,000 80,300 46,421 120,000 1.14K
Qtrly Rev Growth (yoy): 0.16 0.04 0.12 0.02 0.23
Revenue: 80.37B 170.91B 57.39B 37.37B 207.89M
Gross Margin: 0.74 0.38 0.57 0.81 0.48
EBITDA: 31.37B 55.76B 17.60B 16.26B 10.74M
Operating Margin: 0.35 0.29 0.24 0.39 0.07
Net Income: 22.64B 37.04B 11.74B 11.08B N/A
EPS: 2.67 39.75 36.75 2.33 0.24
P/E: 14.14 13.10 27.65 14.76 22.50
PEG (5 yr expected): 1.97 0.84 1.41 1.12 1.86
P/S: 3.92 2.74 5.92 4.19 2.23

Microsoft has the highest PEG ratio among these four companies.

Here is a table of these competitors' insider-trading activities this year.

Company Insider buying / shares Insider selling / shares
GOOG 0 4,348,180
AAPL 0 240,600
ORCL 0 6,812,077

Google and Apple have also seen intensive insider selling during the past 30 days.

Conclusion

There have been five different insiders selling Microsoft and there have not been any insiders buying Microsoft during the past 30 days. Three of these five insiders decreased their holdings by more than 10%. Microsoft has an insider ownership of 4.40%. The last three times that Microsoft saw intensive insider selling was in September 2013, January 2012, and September 2011.

There are 11 analyst buy ratings, 21 neutral ratings, and three sell ratings with an average price target of $35.77. Microsoft is trading at a P/E ratio of 14.14 and a forward P/E ratio of 12.96. Microsoft has a book value of $9.79 per share and the stock has a dividend yield of 2.96%.

Before entering short Microsoft, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are relatively high PEG ratio, bearish analyst price targets, 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.

Source: Insiders Are Selling Microsoft