JPMorgan: 9 Different Insiders Have Sold Shares This Year

Jan.31.14 | About: JPMorgan Chase (JPM)

In this article, I will feature one bank 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%.

JPMorgan Chase & Co. (NYSE:JPM) provides various financial services worldwide.

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Insider selling during the last 30 days

Here is a table of JPMorgan'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
Matthew Zames COO Jan 27 76,000 Yes 271,161 shares 21.9%
Gordon Smith EVP Jan 27 71,953 Yes 215,857 shares 25.0%
Douglas Petno Managing Director Jan 27 21,110 Yes

173,631 shares

10.8%
Marianne Lake CFO Jan 27 4,880 Yes 34,153 shares 12.5%
Mary Erdoes Managing Director Jan 27 63,802 Yes 261,536 shares 19.6%
John Donnelly Director HR Jan 27 9,851 Yes 94,851 shares 9.4%
Ashley Bacon CRO Jan 27 3,051 Yes 21,351 shares 12.5%
Daniel Pinto Managing Director Jan 29 63,718 Yes 386,120 shares 14.2%
Mark O'Donovan Controller Jan 23 7,121 Yes 19,713 shares 26.5%
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There have been 321,486 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, 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 JPMorgan's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
January 2014 321,486 0
December 2013 0 0
November 2013 22,500 0
October 2013 22,500 0
September 2013 0 0
August 2013 3,434 0
July 2013 170,226 0
June 2013 0 0
May 2013 15,668 301,477
April 2013 148,000 436,859
March 2013 0 0
February 2013 34,000 0
January 2013 91,585 6,750
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There have been 829,399 shares sold, and there have been 745,086 shares purchased by insiders since January 2013. The month of January 2014 has seen the most insider selling.

Financials

JPMorgan reported the full-year 2013 financial results on January 14 with the following highlights:

Revenue $99.8 billion
Net income $17.9 billion
Book value $53.25 per share
Tangible book value $40.81 per share
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(Source: Earnings presentation)

JPMorgan has had declining revenue growth since 2010.

JPM Revenue (<a href=

Outlook

JPMorgan expects firmwide adjusted expense to be below $60 billion for 2014.

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(Source: Earnings presentation)

Competition

JPMorgan's competitors include Bank of America Corporation (NYSE:BAC), Barclays (NYSE:BCS), and Citigroup (NYSE:C). Here is a table comparing these companies.

Company JPM BAC BCS C Industry Average (Money Center Banks)
Market Cap: 208.91B 176.67B 57.54B 145.61B 66.28B
Employees: 251,196 242,117 139,900 251,000 74.25K
Qtrly Rev Growth (yoy): 0.00 0.28 0.21 0.04 0.33
Revenue: 96.38B 85.39B 37.68B 68.76B 26.12B
Operating Margin: 0.28 0.20 0.16 0.29 0.28
Net Income: 16.59B 10.08B -832.61M 13.18B N/A
EPS: 4.35 0.90 -0.27 4.42 2.80
P/E: 12.77 18.53 N/A 10.87 13.68
PEG (5 yr expected): 1.60 0.61 16.06 0.51 1.26
P/S: 2.18 2.08 1.54 2.19 2.62
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JPMorgan has the second-highest P/S ratio among these four companies.

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

Company Insider buying / shares Insider selling / shares
BAC 40,000 619,300
BCS

N/A

N/A
C 585 47,222
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Only JPMorgan has seen intensive insider selling during the last 30 days.

Conclusion

There have been nine insiders selling JPMorgan, and there have not been any insiders buying JPMorgan during the last 30 days. Eight of these nine insiders decreased their holdings by more than 10%. JPMorgan has an insider ownership of 0.10%.

Before going short JPMorgan, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are weak revenue growth, and 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.