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In this article, I will feature one industrial 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%.

Xylem (NYSE:XYL) engages in the design, manufacture, and application of engineered technologies for water and wastewater applications.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Colin SabolSVPFeb 610,504No42,497 shares19.8%
Kenneth NapolitanoSVPFeb 728,846No52,856 shares35.3%
Angela BuonocoreSVPFeb 611,996No58,192 shares17.1%
Steven LorangerCEOJan 1589,235Yes228,069 shares28.1%

There have been 140,581 shares sold by insiders during the last 30 days. Steven Loranger 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 Xylem's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
February 201451,3460
January 201489,2350
December 201300
November 20131,5510
October 20139,9750
September 20132,4800
August 201300
July 201310,9810
June 201300
May 201300
April 201300
March 201300
February 201300
January 201300

There have been 165,568 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

Xylem reported the full-year 2013 financial results on February 4 with the following highlights:

Revenue$3.8 billion
Net income$228 million
Cash$533 million
Debt$1.2 billion

(Source: Earnings presentation)

Outlook

Xylem's 2014 guidance is as follows:

Revenue~$4 billion
Adjusted net income$345-$370 million

(Source: Earnings presentation)

Competition

Xylem's competitors include Siemens AG (SI), Danaher Corporation (NYSE:DHR), and Thermo Fisher Scientific (NYSE:TMO). Here is a table comparing these companies.

CompanyXYLSIDHRTMO
Market Cap:6.82B107.74B52.44B42.61B
Employees:12,500360,00066,00039,000
Qtrly Rev Growth (yoy):0.07-0.030.060.06
Revenue:3.84B97.47B19.12B13.09B
Gross Margin:0.390.280.520.44
EBITDA:559.00M10.00B4.17B2.79B
Operating Margin:0.110.070.170.14
Net Income:228.00M5.59B2.70B1.28B
EPS:1.220.663.803.48
P/E:30.30194.2019.7733.80
PEG (5 yr expected):2.251.231.571.30
P/S:1.781.102.693.16

Xylem has the second-lowest gross margin among these four companies.

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

CompanyInsider buying / sharesInsider selling / shares
SIN/AN/A
DHR01,116,490
TMO0540,818

Thermo Fisher has also seen intensive insider selling during the last 30 days.

Conclusion

There have been four different insiders selling Xylem, and there have not been any insiders buying Xylem during the last 30 days. All four of these insiders decreased their holdings by more than 10%. Xylem has an insider ownership of 0.20%.

Before going short Xylem, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is 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.

Source: Xylem: 4 Different Insiders Have Sold Shares This Year