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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 (NASDAQ: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.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Samuel FullerVPJan 62,000No14,678 shares + 7,000 options8.4%
David ZinsnerCFOJan 25,000Yes18,251 shares + 56,400 options6.3%
Ray StataDirectorDec 9-30202,090No2,263,247 shares8.2%
Thomas WesselVPDec 202,000No0 shares100%
Margaret SeifVPDec 163,000No5,352 shares35.9%
Vincent RocheCEODec 10-Jan 673,675No+Yes16,723 shares + 10,000 options73.4%

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.

MonthInsider selling / sharesInsider buying / shares
January 201415,0000
December 2013414,2650
November 20135,0000
October 2013135,0000
September 2013125,1100
August 201317,3600
July 201323,5170
June 2013156,5000
May 201351,7780
April 20138,7150
March 2013105,4420
February 201360,7820
January 201399,8830

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

Outlook

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

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

Competition

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

CompanyADINXPISTMTXN
Market Cap:15.34B10.62B6.96B46.99B
Employees:9,10025,57948,46034,151
Qtrly Rev Growth (yoy):-0.020.07-0.07-0.04
Revenue:2.63B4.64B8.23B12.16B
Gross Margin:0.640.450.320.51
EBITDA:893.60M1.12B475.00M3.98B
Operating Margin:0.300.13-0.050.23
Net Income:673.49M136.00M-892.00M1.88B
EPS:2.140.54-1.011.69
P/E:23.0580.00N/A25.43
PEG (5 yr expected):2.000.38-6.222.23
P/S:5.862.310.853.90

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.

CompanyInsider buying / sharesInsider selling / shares
NXPIN/AN/A
STM

N/A

N/A
TXN04,296,925

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.

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