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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%.

C. R. Bard (BCR) designs, manufactures, packages, distributes, and sells medical, surgical, diagnostic, and patient care devices worldwide.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of C. R. Bard's insider-trading activity during the last 30 days by insider.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Timothy RingCEODec 2-2334,167Yes196,242 shares14.8%
Jim BeasleyGroup PresidentDec 12-1633,428Yes42,569 shares + 17,312 options35.8%
Timothy CollinsGroup PresidentDec 163,347Yes48,790 shares6.4%
John DefordSVPDec 122,792Yes33,555 shares + 16,643 options5.3%
John WeilandCOODec 1010,389Yes129,567 shares7.4%

There have been 84,123 shares sold by insiders during the last 30 days. All these shares were sold pursuant to a Rule 10b5-1 plan.

SEC Rule 10b5-1 is a regulation enacted by the United States Securities and Exchange Commission (SEC) in 2000. The SEC states that Rule 10b5-1 was enacted in order to resolve an unsettled issue over the definition of insider trading, which is prohibited by SEC Rule 10b-5. After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade. This staff interpretation raises the possibility that executives can exploit this safe harbor by entering into 10b5-1 trading plans before they have inside information while retaining the option to later cancel those plans based on inside information.

For example, a CEO of a company could call a broker on January 1 and enter into a plan to sell a particular quantity of shares of his company's stock on March 1, find out terrible news about his company on February 1 that will not become public until April 1, and then go forward with the March 1 sale anyway, saving himself from losing money when the bad news becomes public. Under the terms of Rule 10b5-1(b) this is insider trading because the CEO "was aware" of the inside information when he made the trade. But he can assert an affirmative defense under Rule 10b5-1(c), because he planned the trade before he learned the inside information.

In general, it is a safer way for an insider to sell shares pursuant to a Rule 10b5-1 trading plan than without it.

Insider selling by calendar month

Here is a table of C. R. Bard's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
December 201384,1230
November 201322,9600
October 2013262,4550
September 201346,9080
August 201362,8120
July 2013159,9650
June 201322,8810
May 201319,0240
April 2013763,2400
March 2013685,2480
February 201322,0610
January 20133,3140

There have been 2,154,991 shares sold, and there have been zero shares purchased by insiders this year.

Financials

C. R. Bard reported the third-quarter financial results on October 22 with the following highlights:

Revenue$758.0 million
Net income$93.2 million
Cash$781.7 million
Debt$1.5 billion

Outlook

C. R. Bard's guidance is as follows:

Q4/2013FY2013
Sales growth1-3%2-5%
Adjusted EPS$1.34-$1.39$5.70-$5.75

(click to enlarge)

(Source: November presentation)

Competition

C. R. Bard's competitors include Boston Scientific (BSX), and Johnson & Johnson (JNJ). Here is a table comparing these companies.

CompanyBCRBSXJNJIndustry Average (Medical Instruments & Supplies)
Market Cap:10.43B16.05B258.42B2.17B
Employees:12,20024,000127,6003.90K
Qtrly Rev Growth (yoy):0.040.000.030.07
Revenue:3.00B7.13B70.52B952.63M
Gross Margin:0.620.670.690.62
EBITDA:831.30M1.62B22.69B170.60M
Operating Margin:0.230.130.260.17
Net Income:147.90M-168.00M12.88BN/A
EPS:1.81-0.124.481.70
P/E:73.92N/A20.4342.57
PEG (5 yr expected):2.23N/A2.65N/A
P/S:3.482.253.662.28

C. R. Bard has the second-highest P/S ratio among these three companies.

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

CompanyInsider buying / sharesInsider selling / shares
BSX30,0001,591,833
JNJ

0

113,709

Only C. R. Bard has seen intensive insider selling during the last 30 days.

Conclusion

There have been five different insiders selling C. R. Bard, and there have not been any insiders buying C. R. Bard during the last 30 days. Two of these five insiders decreased their holdings by more than 10%. C. R. Bard has an insider ownership of 0.90%.

Before entering short C. R. Bard, 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: C. R. Bard: 5 Different Insiders Have Sold Shares During The Last 30 Days