Allison Transmission Holdings (NYSE:ALSN) is a manufacturer of fully-automatic transmissions for medium- and heavy-duty commercial vehicles and medium- and heavy-tactical U.S. defense vehicles.
Insider selling during the last 30 days
Here is a table of Allison Transmission's insider activity during the last 30 days.
|Name||Title||Trade Date||Shares Sold||Rule 10b5-1||Current Ownership||Decrease In Ownership|
|Sharon Dean||VP||April 1-17||60,600||Yes||11,195 shares + 50,958 options||49.4%|
|Edward Dyer||VP||April 2-17||13,752||Yes||15,443 shares + 12,308 options||33.1%|
|David Graziosi||CFO||April 11||24,039||Yes||145,884 shares + 271,696 options||5.4%|
|Lawrence Dewey||CEO||April 14||28,000||Yes||245,744 shares + 2,694,864 options||0.9%|
|Michael Headly||SVP||Mar 20-Apr 14||9,000||Yes||38,200 shares||19.1%|
|Richard Reynolds||Director||April 10||5,175||Yes||0 shares + 5,175 options||50.0%|
|David Parish||SVP||Mar 28-Apr 1||30,000||Yes||46,344 shares + 176,451 options||11.9%|
There have been 170,566 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 Allison Transmission's insider activity by calendar month.
|Month||Insider selling / shares||Insider buying / shares|
There have been 82,514,904 shares sold, and there have been zero shares purchased by insiders since January 2013.
Allison Transmission reported the first-quarter financial results on April 16 with the following highlights:
|Net income||$52.1 million|
(Source: Earnings presentation)
Allison Transmission's 2014 guidance is as follows:
|Adjusted EBITDA margin||32%-34%|
|Adjusted free cash flow||$375-$425 million|
(Source: Earnings presentation)
Although Allison Transmission did not provide specific second quarter 2014 guidance, Allison expects second quarter net sales to be higher than the same period in 2013.
|Qtrly Rev Growth (yoy):||0.08||0.01||-0.10|
|PEG (5 yr expected):||3.09||-9.89||1.29|
Allison Transmission has the highest P/S ratio among these three companies.
Here is a table of these competitors' insider activities this year.
|Company||Insider buying / shares||Insider selling / shares|
Only Allison Transmission has seen intensive insider selling during the last 30 days.
There have been seven different insiders selling Allison Transmission, and there have not been any insiders buying Allison Transmission during the last 30 days. Five of these seven insiders decreased their holdings by more than 10%. Allison Transmission has an insider ownership of 40.72%.
Before going short Allison Transmission, I would like to get a bearish confirmation from the Point & Figure chart. The two main reasons for the proposed short entry are a relatively high P/S ratio, and 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.