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In this article, I will feature one financial sector 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%.

Financial Engines (NASDAQ:FNGN) provides independent, technology-enabled portfolio management services, investment advice, and retirement income services to participants in employer-sponsored defined contribution plans.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Raymond SimsCFOJan 168,127Yes40,299 shares16.8%
Kelly O'DonnellEVPJan 154,337Yes11,130 shares + 13,013 options15.2%
Jeffrey MaggioncaldaCEOJan 1415,000Yes250,677 shares5.6%
Anne TuttleEVPJan 6-95,886Yes6,921 shares + 19,024 options18.5%
Mary Lee SharpEVPJan 8-211,994Yes46 shares + 16,086 options11.0%
Garry HalleeEVPJan 710,000Yes125,092 shares + 37,485 options5.8%
Lawrence RaffonePresidentJan 616,202Yes3,710 shares + 64,667 options19.2%

There have been 61,546 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 Financial Engines' insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
January 201461,5460
December 201390,3720
November 2013100,3270
October 201396,3950
September 201394,7290
August 2013147,8330
July 2013139,7300
June 201396,2290
May 2013258,0360
April 2013116,7240
March 2013149,3120
February 2013216,2290
January 201396,0780

There have been 1,663,540 shares sold, and there have been zero shares purchased by insiders since January 2013.


Financial Engines reported the third-quarter financial results on November 5 with the following highlights:

Revenue$62.1 million
Net income$8.1 million
Cash$232.0 million


Financial Engines' guidance is as follows:

Revenue$238-$240 million$274-$279 million
Non-GAAP adjusted EBITDA~$80 million$92-$94 million


Financial Engines' competitors include Ameriprise Financial (NYSE:AMP), and Morningstar (NASDAQ:MORN). Here is a table comparing these companies.

Market Cap:3.40B22.06B3.58B
Qtrly Rev Growth (yoy):
Gross Margin:0.620.550.70
Operating Margin:
Net Income:27.14M1.43B120.06M
PEG (5 yr expected):2.550.811.90

Financial Engines has the highest P/S ratio among these three companies.

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

CompanyInsider buying / sharesInsider selling / shares



Only Financial Engines has seen intensive insider selling during the last 30 days.


There have been seven different insiders selling Financial Engines, and there have not been any insiders buying Financial Engines during the last 30 days. Five of these seven insiders decreased their holdings by more than 10%. Financial Engines has an insider ownership of 0.50%.

There are four analyst buy ratings, one neutral rating, and zero sell ratings with an average price target of $66.25. Before going short Financial Engines, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are bearish analyst price targets, relatively high P/S ratio, and the intensive insider-selling activity.

Source: Financial Engines: 7 Different Insiders Have Sold Shares This Year