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Summary

  • Six insiders sold Costco stock within one month.
  • The stock was not purchased by any insiders in the month of intensive selling.
  • Three of these six insiders decreased their holdings by more than 10%.

Costco Wholesale Corporation (NASDAQ:COST) is engaged in the operation of membership warehouses in the United States and Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Australia, and through majority-owned subsidiaries in Taiwan and Korea.

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Insider selling during the last 30 days

Here is a table of Costco's insider activity during the last 30 days.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Richard GalantiCFOMarch 1415,164No57,168 shares + 23,000 options15.9%
James SinegalDirectorMarch 144,000Yes1,711,462 shares0.2%
Craig JelinekCEOMarch 1441,444No237,228 shares14.9%
John McKayEVPMarch 143,000No65,941 shares4.4%
Timothy RoseEVPMarch 125,000No36,579 shares12.0%
Franz LazarusEVPMarch 3600Yes52,615 shares1.1%

There have been 69,208 shares sold by insiders during the last 30 days. James Sinegal and Franz Lazarus 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 Costco's insider activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
March 201469,2080
February 20144,6000
January 20149,2550
December 201320,5000
November 2013101,5420
October 201372,3420
September 20138,0000
August 20138,0000
July 20138,0000
June 201313,0000
May 201316,0000
April 201357,8300
March 201310,0000
February 20138,0000
January 201328,0000

There have been 442,277 shares sold, and there have been zero shares purchased by insiders since January 2013.

Financials

Costco reported the fiscal 2014 second-quarter, which ended February 16, financial results on March 6 with the following highlights:

Revenue$26.3 billion
Net income$463 million
Cash$6.5 billion
Debt$5.0 billion

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(Source: Earnings presentation)

Costco has a negative EPS growth currently.

Competition

Costco's competitors include Target (NYSE:TGT) and Wal-Mart Stores (NYSE:WMT). Here is a table comparing these companies.

CompanyCOSTTGTWMT
Market Cap:49.92B37.82B241.46B
Employees:103,000N/A2,000,000
Qtrly Rev Growth (yoy):0.06-0.050.01
Revenue:107.89B72.60B476.29B
Gross Margin:0.130.300.25
EBITDA:4.05B6.45B35.74B
Operating Margin:0.030.060.06
Net Income:1.96B1.97B15.88B
EPS:4.453.074.89
P/E:25.5119.4415.24
PEG (5 yr expected):2.261.271.68
P/S:0.460.520.51

Costco has the highest P/E ratio among these three companies.

Here is a table of these competitors' insider activities during the last six months.

CompanyInsider buying / sharesInsider selling / shares
TGT014,873
WMT046,573

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

Conclusion

There have been six different insiders selling Costco, and there have not been any insiders buying Costco during the last 30 days. Three of these six insiders decreased their holdings by more than 10%. Costco has an insider ownership of 0.60%.

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

Source: Costco: 6 Different Insiders Have Sold Shares This Month