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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%.

Synaptics Incorporated (NASDAQ:SYNA) develops, markets, and sells custom-designed human interface solutions for electronic devices and products primarily in China, South Korea, Taiwan, Japan, and the United States.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Keith GeeslinDirectorJan 2818,750No15,436 shares54.8%
Kevin BarberSVPJan 8-2832,500Yes5,286 shares + 48,375 options37.7%
Bretton SewellSVPJan 2414,250Yes

14,069 shares + 50,600 options

18.1%
Russell KnittelDirectorJan 2 - 15364,126Yes11,596 shares + 598,800 options37.4%
Alex WongSVPJan 10-159,500Yes18,822 shares + 6,600 options27.2%
Francis LeeDirectorJan 2-1468,475Yes139,837 shares32.9%
Kathleen BaylessCFOJan 715,000Yes13,389 shares + 105,000 options11.2%

There have been 522,601 shares sold by insiders during the last 30 days. Kevin Barber, Bretton Sewell, Russell Knittel, Alex Wong, Francis Lee, and Kathleen Bayless sold shares pursuant to a Rule 10b5-1 plan. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

Here is a table of Synaptics' insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
January 2014522,6010
December 20133,0000
November 2013121,0000
October 2013351,7240
September 201358,0000
August 201325,0000
July 201300
June 201315,0000
May 2013376,6420
April 20138,2000
March 201362,1890
February 201300
January 201300

There have been 1,543,356 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

Synaptics reported the fiscal 2014 second-quarter, which ended December 31, financial results on January 23 with the following highlights:

Revenue$205.8 million
Net income$17.3 million
Cash$369.4 million

Outlook

Kathy Bayless, CFO, commented on January 23:

"Considering our backlog, customer forecasts, and the resulting expected product mix, we anticipate revenue to be in the range of $180 million to $200 million for the March quarter. The March quarter outlook reflects seasonality, with incremental revenue from our new Fingerprint ID products."

Competition

Synaptics' competitors include Atmel Corporation (NASDAQ:ATML), and Cypress Semiconductor Corporation (NASDAQ:CY). Here is a table comparing these companies.

CompanySYNAATMLCY
Market Cap:1.94B3.56B1.54B
Employees:8525,000N/A
Qtrly Rev Growth (yoy):0.44-0.01-0.07
Revenue:821.88M1.38B722.69M
Gross Margin:0.490.400.47
EBITDA:166.14M119.10M6.40M
Operating Margin:0.190.03-0.06
Net Income:134.04M-41.60M-46.36M
EPS:3.81-0.10-0.31
P/E:15.40N/AN/A
PEG (5 yr expected):1.091.594.54
P/S:2.552.552.07

Synaptics, together with Atmel, 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
ATML02,354,455
CY15,0001,398,804

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

Conclusion

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

Before going short Synaptics, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are relatively high P/S ratio, weak guidance, and the intensive insider-selling activity.

Source: Synaptics: 7 Different Insiders Have Sold Shares This Year