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:
- The stock was sold by three or more insiders within one month.
- The stock was not purchased by any insiders in the month of intensive selling.
- At least two sellers decreased their holdings by more than 10%.
Discover Financial Services (DFS) provides direct banking and payment services in the United States.
Insider selling during the last 30 days
Here is a table of Discover'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|
|Roger Hochschild||COO||Jan 29||100,000||No||1,201,264 shares||7.7%|
|Diane Offereins||EVP||Jan 30||50,000||No||387,435 shares||11.4%|
|Steven Cunningham||SVP||Jan 28||15,000||No||48,576 shares||23.6%|
|James Panzarino||EVP||Jan 28||40,000||No||113,716 shares||26.0%|
|Carlos Minetti||EVP||Jan 28||82,231||No||343,749 shares||19.3%|
|Glenn Schneider||SVP||Jan 28||29,070||No||40,397 shares||41.8%|
There have been 316,301 shares sold by insiders during the last 30 days.
Insider selling by calendar month
Here is a table of Discover's insider-trading activity by calendar month.
|Month||Insider selling / shares||Insider buying / shares|
There have been 886,099 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.
Discover reported the full-year 2013 financial results on January 23 with the following highlights:
|Net interest income||$5.9 billion|
|Net income||$2.4 billion|
|Book value||$22.89 per share|
|Qtrly Rev Growth (yoy):||0.05||0.00||0.28||0.04|
|PEG (5 yr expected):||1.14||1.60||0.61||0.49|
Discover has the 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|
JPMorgan has also seen intensive insider selling during the last 30 days.
There have been six different insiders selling Discover, and there have not been any insiders buying Discover during the last 30 days. Five of these six insiders decreased their holdings by more than 10%. Discover has an insider ownership of 1.10%.
Before going short Discover, 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.