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In this article, I will feature one industrial sector 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%.

Rockwell Automation (NYSE:ROK) provides industrial automation power, control, and information solutions. It operates in two segments, Architecture & Software and Control Products & Solutions.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Rockwell Automation's insider-trading activity during the last 30 days.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
William McCormickDirectorNov 221,500No12,672 shares10.6%
Keith NosbuschCEONov 11-19222,103No487,237 shares + 3,608 options31.2%
John McDermottSVPNov 12-1950,500No

59,815 shares

45.8%
Frank KulaszewiczSVPNov 154,934No16,922 shares + 11,800 options14.7%
Sujeet ChandSVPNov 1315,950No37,874 shares + 14,850 options23.2%
David DorganVPNov 127,850No14,414 shares35.3%
Martin ThomasSVPNov 1132,350No18,917 shares + 1,450 options61.4%
Douglas HagermanSVPNov 1155,905No41,722 shares57.3%
Susan SchmittSVPNov 113,600No14,465 shares19.9%
Steven EtzelVPNov 113,300No10,595 shares23.7%
Dralle RohrVPNov 112,100No19,015 shares9.9%
Theodore CrandallCFONov 734,050Yes85,422 shares + 1,450 options28.2%

There have been 434,142 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 Rockwell Automation's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
November 2013434,1420
October 201300
September 201316,2190
August 2013337,2130
July 201311,5000
June 201300
May 201359,3840
April 201300
March 201300
February 2013552,6660
January 201361,6660

There have been 1,472,790 shares sold and there have been zero shares purchased by insiders this year.

Financials

Rockwell Automation reported the fiscal 2013 full-year, which ended September 30, financial results on November 7 with the following highlights:

Revenue$6.4 billion
Net income$756.3 million
Cash$1.6 billion
Debt$1.1 billion

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(Source: Earnings presentation)

Outlook

Rockwell Automation's fiscal 2014 guidance is as follows:

Revenue$6.6 billion
Organic sales growth2% to 6%
Adjusted EPS$5.95-$6.35

(click to enlarge)

(Source: Earnings presentation)

Competition

Rockwell Automation's competitors include Siemens (SI), ABB Ltd (NYSE:ABB), and Honeywell International (NYSE:HON). Here is a table comparing these companies.

CompanyROKSIABBHONIndustry Average (Diversified Machinery)
Market Cap:15.71B111.00B58.11B69.51B866.29M
Employees:N/A362,000146,100132,0002.45K
Qtrly Rev Growth (yoy):0.03-0.020.080.030.12
Revenue:6.35B98.24B41.50B38.25B1.08B
Gross Margin:0.400.270.290.260.31
EBITDA:1.17B10.55B5.72B5.53B96.85M
Operating Margin:0.160.070.110.120.07
Net Income:755.20M5.29B2.88B3.23BN/A
EPS:5.366.501.254.050.83
P/E:21.1420.2620.2621.9017.13
PEG (5 yr expected):1.560.221.501.701.38
P/S:2.471.131.401.821.00

Rockwell Automation has the highest P/S ratio among these four companies. In Honeywell, there have been 1,901,976 shares sold and there have been 1,000 shares purchased by insiders this year. Honeywell has also seen intensive insider selling during the last 30 days.

Conclusion

There have been 12 different insiders selling Rockwell Automation and there have not been any insiders buying Rockwell Automation during the last 30 days. Eleven of these 12 insiders decreased their holdings by more than 10%. Rockwell Automation has an insider ownership of 0.70%.

Rockwell Automation is trading at a P/E ratio of 21.14 and a forward P/E ratio of 16.62. The company has a book value of $18.65 per share and the stock has a dividend yield of 2.05%.

Before entering short Rockwell Automation, 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.

Source: Rockwell Automation: 12 Different Insiders Have Sold Shares This Month