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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. (JPM) provides various financial services worldwide.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Matthew ZamesCOOJan 2776,000Yes271,161 shares21.9%
Gordon SmithEVPJan 2771,953Yes215,857 shares25.0%
Douglas PetnoManaging DirectorJan 2721,110Yes

173,631 shares

10.8%
Marianne LakeCFOJan 274,880Yes34,153 shares12.5%
Mary ErdoesManaging DirectorJan 2763,802Yes261,536 shares19.6%
John DonnellyDirector HRJan 279,851Yes94,851 shares9.4%
Ashley BaconCROJan 273,051Yes21,351 shares12.5%
Daniel PintoManaging DirectorJan 2963,718Yes386,120 shares14.2%
Mark O'DonovanControllerJan 237,121Yes19,713 shares26.5%

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.

MonthInsider selling / sharesInsider buying / shares
January 2014321,4860
December 201300
November 201322,5000
October 201322,5000
September 201300
August 20133,4340
July 2013170,2260
June 201300
May 201315,668301,477
April 2013148,000436,859
March 201300
February 201334,0000
January 201391,5856,750

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

(click to enlarge)

(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.

(click to enlarge)

(Source: Earnings presentation)

Competition

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

CompanyJPMBACBCSCIndustry Average (Money Center Banks)
Market Cap:208.91B176.67B57.54B145.61B66.28B
Employees:251,196242,117139,900251,00074.25K
Qtrly Rev Growth (yoy):0.000.280.210.040.33
Revenue:96.38B85.39B37.68B68.76B26.12B
Operating Margin:0.280.200.160.290.28
Net Income:16.59B10.08B-832.61M13.18BN/A
EPS:4.350.90-0.274.422.80
P/E:12.7718.53N/A10.8713.68
PEG (5 yr expected):1.600.6116.060.511.26
P/S:2.182.081.542.192.62

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.

CompanyInsider buying / sharesInsider selling / shares
BAC40,000619,300
BCS

N/A

N/A
C58547,222

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.

Source: JPMorgan: 9 Different Insiders Have Sold Shares This Year