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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%.

Micron Technology (NASDAQ:MU) manufactures and markets semiconductor solutions worldwide.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Brian ShieldsVPJan 10240,000No248,222 shares + 234,250 options33.2%
Lawrence MondryDirectorJan 1030,000Yes220,834 shares12.0%
Ronald FosterCFOJan 9-10215,000Yes

683,842 shares + 298,000 options

18.0%
Mark AdamsPresidentJan 9168,492No474,500 shares26.2%
Mercedes JohnsonDirectorJan 28,000Yes108,242 shares6.9%

There have been 661,492 shares sold by insiders during the last 30 days. Lawrence Mondry, Ronald Foster, and Mercedes Johnson sold shares 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 Micron's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
January 2014661,4920
December 201300
November 20131,569,2960
October 2013290,8300
September 2013191,8500
August 2013641,4250
July 2013744,5880
June 2013565,8460
May 2013313,7500
April 20131,015,6930
March 20134,0000
February 20134,0000
January 201354,0000

There have been 6,056,770 shares sold, and there have been zero shares purchased by insiders since January 2013.

Financials

Micron reported the fiscal 2014 first-quarter, which ended November 28, financial results on January 7 with the following highlights:

Revenue$4.0 billion
GAAP net income$358 million
Cash$4.4 billion
Debt$5.8 billion

(click to enlarge)

(Source: Earnings presentation)

Outlook

Micron expects fiscal 2014 second-quarter DRAM production bit growth to be approximately flat, quarter-to-date ASP to be approximately flat, and cost per bit to be down mid-teens.

(click to enlarge)

(Source: Earnings presentation)

Competition

Micron's competitors include SanDisk (NASDAQ:SNDK), Samsung Electronics (OTC:SSNLF), and Toshiba (OTCPK:TOSBF). Here is a table comparing these companies.

CompanyMUSNDKSSNLFTOSBF
Market Cap:24.75B16.08B170.15B18.98B
Employees:30,9004,636N/A206,000
Qtrly Rev Growth (yoy):1.200.280.130.16
Revenue:11.28B5.98B202.93B79.13B
Gross Margin:0.260.44N/A0.27
EBITDA:3.11B1.93B47.95B6.47B
Operating Margin:0.110.250.170.05
Net Income:1.82B918.42M23.02B938.64M
EPS:1.663.78175.840.22
P/E:14.0818.837.3920.18
PEG (5 yr expected):1.990.54N/AN/A
P/S:2.232.740.840.24

Micron has the second-highest P/S ratio among these four companies. In Sandisk, there have been 81,000 shares sold, and there have been zero shares purchased by insiders during the last 30 days. Only Micron has seen intensive insider selling during the last 30 days.

Conclusion

There have been five different insiders selling Micron, and there have not been any insiders buying Micron during the last 30 days. Four of these five insiders decreased their holdings by more than 10%. Micron has an insider ownership of 0.70%.

Before entering short Micron, 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.

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.

Source: Micron: 5 Different Insiders Have Sold Shares This Year