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In this article, I will feature one healthcare 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%.

Covidien (NYSE:COV) develops, manufactures, and sells healthcare products for use in clinical and home settings worldwide.


(Click to enlarge)

Insider selling during the last 30 days

Here is a table of Covidien'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
Richard Brown VP Dec 27 4,000 Yes 65,868 shares 5.7%
Brian King VP Dec 16 5,000 Yes 37,028 shares 11.9%
Eric Green VP Dec 9 4,680 Yes 12,962 shares 26.5%
John Masterson SVP Dec 4-9 38,484 No 72,207 shares + 36,660 options 26.1%
James Clemmer SVP Dec 6 43,607 No 37,308 shares + 45,865 options 34.4%
Michael Sgrignari SVP Dec 5 23,277 No 28,285 shares + 35,499 options 26.7%
Bryan Hanson SVP Dec 2 36,857 No 42,854 shares + 112,369 options 19.2%

There have been 155,905 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 Covidien's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
December 2013 155,905 0
November 2013 152,063 0
October 2013 36,036 0
September 2013 3,440 0
August 2013 254,599 0
July 2013 0 0
June 2013 0 0
May 2013 31,912 0
April 2013 30,098 0
March 2013 66,462 0
February 2013 216,471 0
January 2013 45,416 0

There have been 992,402 shares sold, and there have been zero shares purchased by insiders this year.

Financials

Covidien reported the fiscal 2013 full-year, which ended September 27, financial results on November 8 with the following highlights:

Revenue $10.2 billion
Net income $1.7 billion
Cash $1.9 billion
Debt $5.0 billion

Outlook

Covidien estimates that net sales in fiscal 2014 will be up 2% to 5%.

Competition

Covidien's competitors include Becton, Dickinson and Company (NYSE:BDX), CR Bard (NYSE:BCR), and Johnson & Johnson (NYSE:JNJ). Here is a table comparing these companies.

Company COV BDX BCR JNJ Industry Average (Medical Instruments & Supplies)
Market Cap: 30.81B 21.45B 10.43B 258.42B 2.17B
Employees: 38,500 29,979 12,200 127,600 3.90K
Qtrly Rev Growth (yoy): 0.02 0.05 0.04 0.03 0.07
Revenue: 10.19B 8.01B 3.00B 70.52B 952.63M
Gross Margin: 0.60 0.52 0.62 0.69 0.62
EBITDA: 2.88B 2.13B 831.30M 22.69B 170.60M
Operating Margin: 0.22 0.16 0.23 0.26 0.17
Net Income: 1.60B 929.00M 147.90M 12.88B N/A
EPS: 3.61 6.50 1.81 4.48 1.70
P/E: 18.85 17.01 73.92 20.43 42.57
PEG (5 yr expected): 1.89 1.99 2.23 2.65 N/A
P/S: 3.02 2.68 3.47 3.69 2.28

Covidien has the slowest revenue growth among these four companies.

Here is a table of these competitors' insider-trading activities during the last 30 days.

Company Insider buying / shares Insider selling / shares
BDX 0 344
BCR

0

84,123
JNJ 0 0

CR Bard has also seen intensive insider selling during the last 30 days.

Conclusion

There have been seven different insiders selling Covidien, and there have not been any insiders buying Covidien during the last 30 days. Six of these seven insiders decreased their holdings by more than 10%. Covidien has an insider ownership of 0.20%.

Before entering short Covidien, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is the intensive insider-selling activity.

Source: Covidien: 7 Different Insiders Have Sold Shares During The Last 30 Days