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In this article, I will feature one consumer 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%.

The Boston Beer Company (NYSE:SAM) engages in the production and sale of alcohol beverages primarily in the United States, Canada, Europe, Israel, the Caribbean, the Pacific Rim, and Mexico.

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Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Martin RoperCEOJan 13-28110,000Yes1,030 shares + 40,772 options72.5%
James KochChairmanDec 30-Jan 83,600Yes4,113,811 shares0.1%
Kathleen WadeVPJan 2317Yes10,521 shares2.9%
John GeistVPJan 23,800Yes0 shares + 3,800 options50.0%
David GrinnellVPJan 2325Yes4,092 shares7.4%

There have been 118,042 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 Boston Beer's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
January 2014116,0420
December 201310,1800
November 201319,6910
October 201300
September 201300
August 201316,2000
July 201300
June 20137,2000
May 20132000
April 201375,0000
March 201330,7000
February 201332,1160
January 20135,2170

There have been 312,546 shares sold, and there have been zero shares purchased by insiders since January 2013. The month of January 2014 has seen the most insider selling.

Financials

Boston Beer reported the third-quarter financial results on October 30 with the following highlights:

Revenue$216.4 million
Net income$25.7 million
Cash$43.7 million
Debt$0.6 million

Outlook

Boston Beer's 2013 EPS guidance is $5.05-$5.35.

Competition

Boston Beer's competitors include Anheuser-Busch InBev (NYSE:BUD), and Heineken (OTCPK:HINKF). Here is a table comparing these companies.

CompanySAMBUDHINKF
Market Cap:2.68B155.10B36.41B
Employees:950150,00085,000
Qtrly Rev Growth (yoy):0.300.140.07
Revenue:686.68M41.77B24.55B
Gross Margin:0.520.590.38
EBITDA:136.21M16.17B4.88B
Operating Margin:0.160.320.13
Net Income:68.65M13.69B3.65B
EPS:5.108.366.34
P/E:41.2111.579.98
PEG (5 yr expected):3.903.34N/A
P/S:3.963.781.49

Boston Beer has the highest P/S ratio among these three companies.

Conclusion

There have been five different insiders selling Boston Beer, and there have not been any insiders buying Boston Beer during the last 30 days. Two of these five insiders decreased their holdings by more than 10%.

Boston Beer has a $196 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $196 price target. I would place a stop loss at $246, which is the 30-day high. The three main reasons for the proposed short entry are bearish Point and Figure chart, relatively high P/S ratio, and the intensive insider-selling activity.

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Source: Boston Beer: 5 Different Insiders Have Sold Shares This Year