Analog Devices: 6 Different Insiders Have Sold Shares During The Last 30 Days

Jan.10.14 | About: Analog Devices (ADI)

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%.

Analog Devices (NYSE:ADI) is engaged in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits for use in industrial, automotive, consumer, and communication markets worldwide.

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Insider selling during the last 30 days

Here is a table of Analog Devices' insider-trading activity during the last 30 days by insider.

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Samuel Fuller VP Jan 6 2,000 No 14,678 shares + 7,000 options 8.4%
David Zinsner CFO Jan 2 5,000 Yes 18,251 shares + 56,400 options 6.3%
Ray Stata Director Dec 9-30 202,090 No 2,263,247 shares 8.2%
Thomas Wessel VP Dec 20 2,000 No 0 shares 100%
Margaret Seif VP Dec 16 3,000 No 5,352 shares 35.9%
Vincent Roche CEO Dec 10-Jan 6 73,675 No+Yes 16,723 shares + 10,000 options 73.4%
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There have been 287,765 shares sold by insiders during the last 30 days. Only two insiders used 10b5-1 plans. Vincent Roche sold 8,000 shares pursuant to a 10b5-1 plan, and David Zinsner sold 5,000 shares pursuant to a 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 Analog Devices' insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
January 2014 15,000 0
December 2013 414,265 0
November 2013 5,000 0
October 2013 135,000 0
September 2013 125,110 0
August 2013 17,360 0
July 2013 23,517 0
June 2013 156,500 0
May 2013 51,778 0
April 2013 8,715 0
March 2013 105,442 0
February 2013 60,782 0
January 2013 99,883 0
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There have been 1,218,352 shares sold, and there have been zero shares purchased by insiders since January 2013. The month of December has seen the most insider selling.

Financials

Analog Devices reported the fiscal 2013 full-year, which ended November 2, financial results on November 26 with the following highlights:

Revenue $2.6 billion
Net income $673.5 million
Cash $4.7 billion
Debt $872.2 million
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Outlook

Analog Devices' fiscal 2014 first-quarter guidance is as follows:

Revenue growth -5% to -10%
EPS $0.44-$0.52
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Competition

Analog Devices' competitors include NXP Semiconductors (NASDAQ:NXPI), STMicroelectronics (NYSE:STM), and Texas Instruments (NYSE:TXN). Here is a table comparing these companies.

Company ADI NXPI STM TXN
Market Cap: 15.34B 10.62B 6.96B 46.99B
Employees: 9,100 25,579 48,460 34,151
Qtrly Rev Growth (yoy): -0.02 0.07 -0.07 -0.04
Revenue: 2.63B 4.64B 8.23B 12.16B
Gross Margin: 0.64 0.45 0.32 0.51
EBITDA: 893.60M 1.12B 475.00M 3.98B
Operating Margin: 0.30 0.13 -0.05 0.23
Net Income: 673.49M 136.00M -892.00M 1.88B
EPS: 2.14 0.54 -1.01 1.69
P/E: 23.05 80.00 N/A 25.43
PEG (5 yr expected): 2.00 0.38 -6.22 2.23
P/S: 5.86 2.31 0.85 3.90
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Analog Devices has the highest P/S ratio among these four companies.

Here is a table of these competitors' insider-trading activities during the last 12 months.

Company Insider buying / shares Insider selling / shares
NXPI N/A N/A
STM

N/A

N/A
TXN 0 4,296,925
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Only Analog Devices has seen intensive insider selling during the last 30 days.

Conclusion

There have been six different insiders selling Analog Devices, and there have not been any insiders buying Analog Devices during the last 30 days. Three of these six insiders decreased their holdings by more than 10%. Analog Devices has an insider ownership of 0.30%.

There are 13 analyst buy ratings, 13 neutral ratings, and zero sell ratings with an average price target of $49.16. Before entering short Analog Devices, I would like to get a bearish confirmation from the Point and Figure chart. The four main reasons for the proposed short entry are bearish analyst price targets, relatively high P/S ratio, weak guidance, 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.