This report identifies last week’s insider trades of noteworthy significance in technology either by virtue of their size, the number of insiders buying or selling, based on who is buying or selling, or by the trend of their buys and sales over the long-term. As a rule, insider buys are more informative than sells. This is because insiders sell often, and they sell for a variety of reasons that may be completely unrelated to the health of the company, including, for example, to diversity their holdings or to pay for an upcoming personal expense. In contrast, insider buying is relatively uncommon, and since they have an exclusive window into their own company’s performance, it is reasonable to presume that they probably have good reasons based on information at their disposal when they are risking their own assets to buy company stock.
Overall, during the past week, corporate insiders traded a number of technology stocks, including buying in companies such as Corning Inc. (NYSE:GLW) and Cirrus Logic Inc. (NASDAQ:CRUS), and selling in companies such as Intel Corp. (NASDAQ:INTC) and Sandisk Corp. (SNDK). Many of these were regular trades, and others were automatic trades made under SEC Rule 10b5-1. It is generally believed that regular insider share purchases and sales carry more predictive value as they are made voluntarily by the insiders. Conversely, trades made under SEC Rule 10b5-1, called “Automatic Buys” and “Automatic Sells”, are part of a pre-determined plan or contract, and it is assumed that the plan was created before the insider had any privileged non-public information. Generally, almost all automatic trades are sells, not buys.
While insiders are prohibited from trading based on nonpublic information, most believe that such trading does occur around the edges. The thinking goes that corporate insiders, because of their access, have the most up-to-date information on the health of their companies and the industries they operate in. Investors, as a result, can benefit from the timely knowledge of insider transactions. In fact, one University of Michigan study found that when executives bought shares in their own companies, the stocks tended to outperform the total market by 8.9% over the next 12 months. Conversely, when they sold shares, the stock underperformed by 5.4%.
Furthermore, even automated trades made under 10b5-1 have some predictive value due to loopholes in the rule that, for example, allow the insider to cancel the trading plan without any penalty or legal liability. So, the insider could set up a 10b5-1 trading plan before they have inside information (for example, from a quarterly report and guidance) while retaining the option to later cancel the plan based on the inside information. So, in effect, the execution of an automated trade also carries some predictive value as insiders retain the option under the existing rules to cancel their trades without penalty or legal liability.
Insider trading as defined here (and by the SEC) includes not just corporate insiders such as company executives and key employees, but also directors and large shareholders that have access to non-public information. Large shareholders are defined by the SEC for this purpose are those that having beneficial ownership of ten percent of more of the firm’s equity securities (including institutional investors). Furthermore, like in the 13-D and 13-G filings for Institutions, the SEC Forms 3 and 4 on insider filings are extremely timely, and hence of greater significance, as they must be reported within two business days of the trade.
The following is our summary of the most recent major insider filings in the technology sector during the last week:
- Insiders Selling Microsoft Corp. (NASDAQ:MSFT): MSFT is the world’s leading software company. It develops operating systems, business software, and other applications for servers, PCs, and intelligent devices. MSFT's online efforts include the MSN network of Internet products and services and alliances with companies involved with broadband access and various forms of digital interactivity. Insiders currently hold 2.15 billion shares or 37.9% of outstanding shares. During the past week, besides Bill Gates’s automatic periodic 10b5-1 sell of 5.0 million shares, the President of Windows Division Steven Sinofsky acquired 305,550 shares under an employee stock option plan (ESOP), and turned around and sold (regular sale) all 305,550 shares. Mr. Sinofsky ended the week with 820,012 shares, so the sale is a significant part of his overall holdings. Also, MSFT COO Kevin Turner sold (regular sale) 40,000 shares during the week. Overall, MSFT insiders have sold 167.5 million shares during the past year, and no insider bought the stock during that period.
- Insider Selling Intel Corp. (INTC): INTC is one of the world’s largest manufacturers of semiconductor chips, including microprocessors, chipsets, network processors, motherboards, non-volatile memory and storage. Its products are used in notebooks, netbooks, desktops, servers, workstations, storage products, embedded applications, communications products, consumer electronics devices, and handhelds. Insiders currently hold 18.6 million shares or 0.33% of outstanding shares, and during the last week, eight insiders exercised their options and acquired 0.55 million shares. Most of the insiders turned around and sold the resulting shares, selling 0.52 million shares during the past week, with some of them being automatic sells under 10b5-1 plans. A significant 0.28 million shares were sold by EVP Arvind Sodhani as a regular (not automatic) sell; at the end of the week, Mr. Sodhani owned 0.26 million shares of INTC, so the 0.28 million shares sold were a significant part of his overall holdings in INTC. Overall, during the past year, INTC insiders have sold 0.95 million shares, and no insider bought the stock during that period.
- Insider Buying Corning Inc. (GLW): GLW manufactures glass substrates for LCDs, optical fiber and cables for communications, and ceramic pollution control products. Its LCDs are used in high-performance displays for TVs and smartphones, including in the venerable iPad. Insiders currently hold 0.3% of company shares, and during the last week, Director John Canning bought (regular buy) 30,000 shares, adding to his prior 37,873 shares in GLW. Overall, during the past year, insiders have sold 2.5 million shares, and they have bought a total of 105,000 GLW shares during that period.
- Insider Buying Cirrus Logic Inc. (CRUS): CRUS is a designer of analog and mixed-signal ICs and embedded software for consumer and commercial audio, industrial and energy markets. Insiders currently hold 5.3 million shares or 9.9% of outstanding shares, and during the last week, CEO Jason Rhode and Director Henry Smith bought (regular buy) a total of 139,000 shares. Overall, during the past year, insiders have been very active buying 280,500 shares and selling 526,837 shares.
- Insiders Selling EMC Corp. (NYSE:EMC): EMC develops, delivers and supports information and virtual infrastructure technologies and solutions, and offers enterprise storage systems and software which are deployed in storage area networks (SAN) and network attached storage (NAS). Insiders currently hold 16.0 million shares or 0.8% of outstanding shares. During the past week, three insiders exercised their options and acquired 97,655 shares. The three individuals included CFO David Goulden, Chief Accounting Officer & COO of Finance Denis Cashman, and President & COO of Cloud Services Elias Howard. These three and EVP & General Counsel Paul Dacier sold (regular sale) 1.30 million shares during the week. Overall, EMC insiders sold 4.9 million shares during the past year, and no insider bought the stock during that period.
- Insiders Selling Sandisk Corp. (SNDK): SNDK manufactures non-volatile or flash removable memory cards used in a number of rapidly growing consumer electronics products such as smart phones, personal digital assistants, digital cameras, portable digital music players, digital video recorders, gaming devices and computers. Insiders currently hold 0.3 million shares or 0.15% of outstanding shares. During the last week, five insiders exercised their options and acquired 61,643 shares, and then turned around and sold (regular sale) 72,639 shares during the week. The selling insiders included VP & Chief Accounting Officer Donald Robertson, Director Kevin Denuccio, SVP & Chief Legal Officer James Brelsford, and SVP of Strategy & Business Development Sumit Sadana. Overall, during the past year, SNDK insiders have sold 0.92 million shares, and no insider bought the stock during that period.
- Insiders Selling Jabil Circuit Inc. (NYSE:JBL): JBL is a contract manufacturer of electronics for the aerospace, automotive, computing, consumer, medical and telecom markets. Insiders currently hold 10.5 million shares or 4.8% of outstanding shares. During the last week, five insiders sold (regular sale) a total of 305,563 shares. The selling insiders included CFO Forbes Alexander, EVP & CEO of Materials Tech Group John Lovato, EVP & CEO of After-Market Services Group Hartmut Liebel, SVP & Controller Meheryar Dastoor, and Treasurer Sergio Cadavid. Overall, during the past year, JBL insiders have sold 2.36 million shares, and insiders bought a total of 5,500 shares during that period.
- Insiders Buying Itron Inc. (NASDAQ:ITRI): ITRI manufactures meters and automated meter reading and advanced meter reading infrastructure software for the Utility industry. Insiders currently hold 0.6 million shares or 1.6% of outstanding shares, and during the last week, CEO Leroy Nosbaum bought 27,000 shares and Chairman of the Board Jon Eliassen bought 1,000 shares (both regular, not automatic buys). Overall, during the past year, insiders have bought 28,000 shares and sold 6,000 shares.
- Insiders Selling Manhattan Associates Inc. (NASDAQ:MANH): MANH develops supply chain management software for manufacturers, distributors, retailers and transportation providers. Insiders currently hold 2.8 million shares or 12.9% of outstanding shares, and during the last week, five insiders sold (regular sale) a total of 0.31 million shares. Three of these sales were completely of shares acquired after exercising their options, and one was partially from shares acquired after exercising their options. The selling insiders included CEO Peter Sinisgalli, Executive VP of Americas Operations Jeffrey Mitchell, Executive VP of Global Operations Eddie Capel, Director Thomas Noonan and Director John Huntz. Overall, during the past year, MANH insiders have sold 0.94 million shares, and no insiders bought MANH shares during that period.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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