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Summary

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

IPG Photonics Corporation (NASDAQ:IPGP) develops and manufactures fiber lasers, fiber amplifiers, and diode lasers that are used in various applications, primarily in materials processing.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of IPG Photonics' insider activity during the last 30 days.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
IP Fibre Devices Ltd10% OwnerApril 3-2156,617Yes7,209,385 shares0.8%
Alexander OvtchinnikovSVPApril 176,563Yes113,479 shares + 19,687 options4.7%
Valentin Gapontsev Trust I10% OwnerMar 25-Apr 1733,334Yes7,821,999 shares0.4%
Valentin GapontsevCEOApril 3-2140,000Yes515,931 shares7.2%
Angelo LoprestiSVPApril 1510,000Yes50,712 shares + 10,000 options14.1%
Trevor NessSVPApril 3-145,000Yes6,890 shares + 17,500 options17.0%
Timothy MammenCFOApril 144,999Yes25,468 shares16.4%

There have been 156,513 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 IPG Photonics' insider activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
April 2014129,8460
March 2014120,6670
February 2014107,3340
January 201400
December 201317,7500
November 201327,5620
October 201328,0200
September 201336,8150
August 201313,8670
July 201316,7500
June 201310,7500
May 20136,7500
April 201314,7090
March 201300
February 201311,9830
January 201321,7540

There have been 564,557 shares sold, and there have been zero shares purchased by insiders since January 2013. The month of April 2014 has seen the most insider selling.

Financials

IPG Photonics reported the full-year 2013 financial results on February 14 with the following highlights:

Revenue$648.0 million
Net income$155.8 million
Cash$448.8 million
Debt$16.0 million
Backlog$265.0 million

The seven insiders sold their shares after these results.

(click to enlarge)

(Source: Investor presentation)

Outlook

IPG Photonics' guidance for the first quarter of 2014 is as follows:

Revenue$160 million to $175 million
EPS$0.69 to $0.83

Competition

IPG Photonics' competitors include Coherent (NASDAQ:COHR), Fanuc (OTCPK:FANUY), and Rofin-Sinar Technologies (NASDAQ:RSTI). Here is a table comparing these companies.

CompanyIPGPCOHRFANUYRSTI
Market Cap:3.78B1.59B35.39B666.32M
Employees:2,8002,5145,2612,270
Qtrly Rev Growth (yoy):0.140.06-0.09-0.15
Revenue:648.03M820.48M5.60B539.02M
Gross Margin:0.520.390.480.35
EBITDA:252.21M118.96M2.19B55.21M
Operating Margin:0.340.100.350.07
Net Income:155.78M63.90M1.30B28.07M
EPS:2.972.591.110.98
P/E:24.5324.7427.2023.89
PEG (5 yr expected):0.941.47N/A2.06
P/S:5.851.926.351.22

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

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

CompanyInsider buying / sharesInsider selling / shares
COHR017,770
FANUYN/AN/A
RSTI080,000

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

Conclusion

There have been seven different insiders selling IPG Photonics, and there have not been any insiders buying IPG Photonics during the last 30 days. Three of these seven insiders decreased their holdings by more than 10%. IPG Photonics has an insider ownership of 18.05%.

Before going short IPG Photonics, 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.

Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Source: IPG Photonics: 7 Different Insiders Have Sold Shares During The Last 30 Days