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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%.

Juniper Networks (NYSE:JNPR) designs, develops, and sells products and services that provide network infrastructure for networking requirements of service providers, enterprises, governments, and research and public sector organizations worldwide.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Mitchell GaynorEVPJan 28250,000Yes13,372 shares94.9%
Kevin JohnsonDirectorJan 2875,000Yes337,691 shares18.2%
Robyn DenholmCFOJan 2840,000Yes24,309 shares62.2%

There have been 365,000 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 Juniper Networks' insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
January 2014365,0000
December 201300
November 2013325,1460
October 201346,0000
September 201300
August 2013335,0000
July 201300
June 201300
May 201320,0000
April 201300
March 20132,5520
February 201385,0000
January 201335,0000

There have been 1,213,698 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

Juniper Networks reported preliminary full-year 2013 financial results on January 23 with the following highlights:

Revenue$4.7 billion
Net income$439.8 million
Cash$2.8 billion
Debt$999.3 million

Outlook

Juniper Networks' first-quarter guidance is as follows:

Revenue$1,120-$1,160 million
Non-GAAP net income$0.27-$0.30 per share

(click to enlarge)

(Source: Earnings presentation)

Peer performance

Juniper Networks has been underperforming the Nasdaq Composite index during the last three years.

JNPR 1 Year Total Returns Chart

Competition

Juniper Networks' competitors include Alcatel-Lucent (NYSE:ALU), and Cisco Systems (NASDAQ:CSCO). Here is a table comparing these companies.

CompanyJNPRALUCSCO
Market Cap:14.10B9.09B116.93B
Employees:N/A72,34475,049
Qtrly Rev Growth (yoy):0.120.020.02
Revenue:4.67B18.90B48.82B
Gross Margin:0.630.310.61
EBITDA:794.90M1.44B14.06B
Operating Margin:0.130.040.24
Net Income:439.80M-3.04B9.89B
EPS:0.86-1.351.84
P/E:32.47N/A11.87
PEG (5 yr expected):1.420.261.19
P/S:3.090.492.37

Juniper Networks 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
ALUN/AN/A
CSCO

0

4,604,743

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

Conclusion

There have been three different insiders selling Juniper Networks, and there have not been any insiders buying Juniper Networks during the last 30 days. All three of these insiders decreased their holdings by more than 10%. Juniper Networks has an insider ownership of 0.40%.

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

Source: Juniper Networks: 3 Different Insiders Have Sold Shares This Year