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In this article, I will feature one healthcare 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%.

Merck & Co. (NYSE:MRK) provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products worldwide.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Bridgette HellerEVPFeb 1343,870No27,586 shares + 24,877 options45.5%
Adam SchechterEVPFeb 1118,000No70,507 shares20.3%
Kenneth FrazierCEOFeb 1141,520No266,274 shares13.5%
John CananSVPFeb 1110,000No14,041 shares41.6%
Willie DeeseEVPFeb 1050,000No106,723 shares31.9%
Peter WendellDirectorFeb 105,000No1,000 shares83.3%
Wendell WeeksDirectorFeb 105,000No200 shares96.2%

There have been 173,390 shares sold by insiders during the last 30 days.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
February 2014173,3900
January 201400
December 201300
November 201300
October 20135000
September 201300
August 201350,6380
July 201300
June 201300
May 2013380,3460
April 201300
March 201300
February 201300
January 201300

There have been 604,874 shares sold, and there have been zero shares purchased by insiders since January 2013.

Financials

Merck reported the full-year 2013 financial results on February 5 with the following highlights:

Revenue$44.0 billion
GAAP net income$4.4 billion

MRK Revenue (<a href=

Merck's revenues peaked in 2012.

Outlook

Merck's 2014 guidance is as follows:

Revenue$42.4-$43.2 billion
GAAP EPS$2.15-$2.47

Pipeline

Merck's pipeline as of October 31, 2013 consisted of the following.

(click to enlarge)

(Source: Merck)

(click to enlarge)

(Source: Merck)

Competition

Merck's competitors include GlaxoSmithKline (NYSE:GSK), Novartis AG (NYSE:NVS), and Pfizer (NYSE:PFE). Here is a table comparing these companies.

CompanyMRKGSKNVSPFE
Market Cap:161.87B133.81B200.71B206.79B
Employees:77,300N/A135,696N/A
Qtrly Rev Growth (yoy):-0.040.020.02N/A
Revenue:44.03B42.60B58.83B51.58B
Gross Margin:0.640.700.670.82
EBITDA:15.93B13.45B16.20B23.11B
Operating Margin:0.210.260.190.33
Net Income:4.40B8.74B9.18B11.34B
EPS:1.473.553.703.20
P/E:37.6715.7222.369.97
PEG (5 yr expected):8.992.073.026.63
P/S:3.663.103.393.98

Merck has the second-highest P/S ratio among these four companies.

Here is a table of these competitors' insider-trading activities this year.

CompanyInsider buying / sharesInsider selling / shares
GSKN/AN/A
NVSN/AN/A
PFE0160,000

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

Conclusion

There have been seven different insiders selling Merck, and there have not been any insiders buying Merck during the last 30 days. All seven of these insiders decreased their holdings by more than 10%. Merck has an insider ownership of 0.03%.

Before going short Merck, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are negative revenue growth, and the intensive insider-selling activity.

Source: Merck: 7 Different Insiders Have Sold Shares This Month