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:
- 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%.
Rackspace Hosting (NYSE:RAX) provides cloud computing services, managing Web-based IT systems for small and medium-sized businesses, and large enterprises worldwide.
Insider selling during the last 30 days
Here is a table of Rackspace'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|
|Alan Schoenbaum||SVP||Nov 13-18||74,028||Yes||71,294 shares||50.9%|
|James Bishkin||Director||Nov 13||20,000||Yes||57,886 shares||25.7%|
|Lanham Napier||CEO||Nov 13-15||902,238||Yes||
There have been 996,266 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 Rackspace's insider-trading activity by calendar month.
|Month||Insider selling / shares||Insider buying / shares|
There have been 1,408,818 shares sold and there have been zero shares purchased by insiders this year. The month of November has seen the most insider selling.
Rackspace reported the third-quarter financial results on November 11 with the following highlights:
|Net income||$16.3 million|
Rackspace's guidance for the fourth quarter is sequential revenue growth between 3% and 5%, which would result in revenues between $400 million and $408 million.
Rackspace has the second-highest P/S ratio among these four companies.
Here is a table of these competitors' insider-trading activities this year.
|Company||Insider buying / shares||Insider selling / shares|
Only Rackspace has seen intensive insider selling during the last 30 days.
There have been three different insiders selling Rackspace and there have not been any insiders buying Rackspace during the last 30 days. All three of these insiders decreased their holdings by more than 10%. Rackspace has an insider ownership of 1.30%.
Rackspace is trading at a P/E ratio of 59.36, and a forward P/E ratio of 54.16. The company has a book value of $6.77 per share.
Rackspace has a $26 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $26 price target. I would place a stop loss at $54, which is the six-month high. The three main reasons for the proposed short entry are bearish Point and Figure chart, high P/E ratio, and the intensive insider selling activity.
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in RAX 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.