Herbalife: 3 Different Insiders Have Sold Shares During The Last 30 Days

Jun.22.14 | About: Herbalife Ltd. (HLF)

Summary

3 insiders sold Herbalife stock within one month.

The stock was not purchased by any insiders in the month of intensive selling.

2 of these 3 insiders decreased their holdings by more than 10%.

Herbalife (NYSE:HLF) sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, and personal care products worldwide.

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Insider selling during the last 30 days

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

Name Title Trade Date Shares Sold Option Exercise & Sale Rule 10b5-1 Current Ownership Decrease In Ownership
Patricio Cuesta SVP June 18 2,975 No Yes 8,643
shares + 63,536 options
4.0%
Richard Bermingham Director June 13 16,000 Yes Yes 24,753
shares
39.3%
John Tartol Director May 21 50,000 No No 235,573 shares + 12,110 options 16.8%
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There have been 68,975 shares sold by insiders during the last 30 days. Patricio Cuesta, and Richard Bermingham sold their 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 Herbalife's insider activity by calendar month.

Month Insider selling / shares Insider buying / shares
June 2014 18,975 0
May 2014 300,000 0
April 2014 0 0
March 2014 0 0
February 2014 0 33,515
January 2014 10,938 0
December 2013 1,989 0
November 2013 0 0
October 2013 0 0
September 2013 0 0
August 2013 388 0
July 2013 0 0
June 2013 0 0
May 2013 0 611,354
April 2013 0 0
March 2013 0 2,339,980
February 2013 0 0
January 2013 0 0
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There have been 332,290 shares sold and there have been 2,984,849 shares purchased by insiders since January 2013. The month of May 2014 has seen the most insider selling.

Financials

Herbalife reported the first-quarter financial results on April 28 with the following highlights:

Revenue $1.3 billion
GAAP net income $74.6 million
Cash $1.3 billion
Debt $1.8 billion
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The three insiders sold their shares after these results.

Outlook

Herbalife's guidance is as follows:

Q2/2014 FY2014
Net sales growth vs 2013 10.0%-12.0% 10.0%-12.0%
EPS $1.51-$1.55 $6.10-$6.30
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Competition

Herbalife's competitors include GNC Holdings (NYSE:GNC). Here is a table comparing these two companies.

Company HLF GNC
Market Cap: 6.37B 3.22B
Employees: 7,000 6,100
Qtrly Rev Growth (yoy): 0.12 0.02
Revenue: 4.96B 2.64B
Gross Margin: 0.50 0.38
EBITDA: 779.02M 522.28M
Operating Margin: 0.14 0.18
Net Income: 483.28M 262.28M
EPS: 4.58 2.74
P/E: 14.19 12.93
PEG (5 yr expected): 0.55 0.82
P/S: 1.29 1.24
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Herbalife is trading at a similar P/S ratio than GNC. In GNC, there have not been any insider selling since November 2013.

Conclusion

There have been three different insiders selling Herbalife, and there have not been any insiders buying Herbalife during the last 30 days. Two of these three insiders decreased their holdings by more than 10%. Herbalife has an insider ownership of 17.98%.

Before going short Herbalife, I would like to get a bearish confirmation from the Point & Figure chart. The main reason for the proposed short entry is the intensive insider-selling activity.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.