Guidewire: 8 Different Insiders Have Sold Shares During The Last 30 Days

Jan.14.14 | About: Guidewire Software, (GWRE)

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%.

Guidewire Software (NYSE:GWRE) provides system software to the property and casualty insurance industry primarily in the United States, Canada, Australia, the United Kingdom, and internationally.

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Insider selling during the last 30 days

Here is a table of Guidewire'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
Priscilla Hung SVP Jan 2-8 51,089 Yes 0 shares + 1,563 options 97.0%
Kenneth Branson Director Jan 7 25,000 Yes 910,179 shares 2.7%
Craig Conway Director Jan 2 12,000 Yes 191,472 shares 5.9%
Alex Naddaff VP Dec 19-23 6,233 Yes 1,927 shares + 32,168 options 15.5%
Karen Blasing CFO Dec 19-23 1,627 Yes 1,794 shares + 9,897 options 12.2%
Marcus Ryu CEO Dec 18-19 130,000 Yes 401,392 shares 24.5%
Jeremy Henrickson VP Dec 13 3,000 Yes 71,647 shares + 3,935 options 3.8%
Guy Dubois Director Dec 13 7,745 Yes 2,413 shares 76.2%
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There have been 236,694 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 Guidewire's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
January 2014 88,089 0
December 2013 193,805 0
November 2013 50,138 0
October 2013 60,136 0
September 2013 502,573 1,000
August 2013 33,200 0
July 2013 43,200 0
June 2013 709,867 0
May 2013 43,200 0
April 2013 62,450 0
March 2013 476,012 0
February 2013 986,486 0
January 2013 103,525 1,000
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There have been 3,352,681 shares sold, and there have been 2,000 shares purchased by insiders since January 2013.

Financials

Guidewire reported the fiscal 2014 first-quarter, which ended October 31, financial results on December 3 with the following highlights:

Revenue $66.5 million
GAAP net loss $10.6 million
Cash $576.9 million
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Outlook

Guidewire's guidance is as follows:

Q2/2014 FY2014
Revenue $76-$78 million $330.5-$342.5 million
GAAP net loss $11.3-$10.1 million $28.7-$25.7 million
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Competition

Guidewire's competitors include Accenture (NYSE:ACN), and Computer Sciences Corporation (NYSE:CSC). Here is a table comparing these companies.

Company GWRE ACN CSC
Market Cap: 3.27B 53.00B 8.22B
Employees: 1,149 281,000 90,000
Qtrly Rev Growth (yoy): 0.05 0.02 -0.10
Revenue: 303.88M 28.70B 14.28B
Gross Margin: 0.53 0.33 0.23
EBITDA: 3.68M 4.42B 2.14B
Operating Margin: -0.00 0.14 0.08
Net Income: 4.32M 3.33B 652.00M
EPS: 0.07 4.70 7.51
P/E: 697.14 17.72 7.44
PEG (5 yr expected): 17.67 1.52 1.89
P/S: 10.69 1.84 0.58
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Guidewire has the highest P/S ratio among these three companies.

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

Company Insider buying / shares Insider selling / shares
ACN 0 63,780
CSC 0 0
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Only Guidewire has seen intensive insider selling during the last 30 days.

Conclusion

There have been eight different insiders selling Guidewire, and there have not been any insiders buying Guidewire during the last 30 days. Five of these eight insiders decreased their holdings by more than 10%. Guidewire has an insider ownership of 3.00%.

Guidewire has a $38 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $38 price target. I would place a stop loss at $52, which is the all-time high. The four main reasons for the proposed short entry are bearish Point and Figure chart, relatively high P/S ratio, high P/E ratio, and the intensive insider-selling activity.

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Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in GWRE, over 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.