A study titled "Predictive and Statistical Properties of Insider Trading" by James H. Lorie and Victor Niederhoffer reached the following conclusion:
This study indicates that proper and prompt analysis of data on insider trading can be profitable, although almost all previously published studies have reached the contrary conclusion. When insiders accumulate a stock intensively, the stock can be expected to outperform the market during the next six months. Insiders tend to buy more often than usual before large price increases and to sell more than usual before price decreases.
Based on the findings of this encouraging insider trading study, I screened for companies where at least one insider made a sell transaction filed on August 24. I chose the top five companies with insider selling in dollar terms. Here is a look at the five stocks:
1. Kohl's (KSS) is a family-focused, value-oriented specialty department store offering moderately priced, exclusive and national brand apparel, shoes, accessories, beauty and home products in an exciting shopping environment. With a commitment to environmental leadership, Kohl's operates 1,134 stores in 49 states. In support of the communities it serves, Kohl's has raised more than $208 million for children's initiatives nationwide through its Kohl's Cares cause merchandise program, which operates under Kohl's Cares, LLC, a wholly-owned subsidiary of Kohl's Department Stores, Inc.
- William Kellogg sold 900,000 shares on August 22-24. William Kellogg serves as a director of the company.
- John Herma sold 500,000 shares on August 22-24. John Herma serves as a director of the company.
- Peter Sommerhauser sold 43,982 shares on August 22-24. Peter Sommerhauser serves as a director of the company.
The company reported the second-quarter financial results on August 9 with the following highlights:
|Net income||$240 million|
|Quarterly dividend||$0.32 per share|
The company provided initial guidance for the fiscal quarter ending October 27, 2012 of $0.83 to $0.89 per diluted share. The guidance is based on total sales growth of 1 to 3 percent and comparable store sales growth of flat to 2 percent and includes expected third quarter share repurchases of $300 million. After incorporating its second quarter results and third quarter outlook, the company now expects to earn $4.50 to $4.65 per diluted share for fiscal 2012 versus its previous guidance of $4.75 per diluted share.
The stock has a $74 price target from the Point and Figure chart. The stock has seen insider selling in May and August 2012. There has not been any insider buying since December 2011. The stock is currently trading at a P/E ratio of 12.41. I am not interested in shorting the stock before the $74 price target is met.
2. Western Refining (WNR) is an independent refining and marketing company headquartered in El Paso, Texas. Western operates refineries in El Paso and Gallup, New Mexico. Western's asset portfolio also includes stand-alone refined products terminals in Albuquerque and Bloomfield, New Mexico, asphalt terminals in Albuquerque, El Paso, and Phoenix and Tucson, Arizona, retail service stations and convenience stores in Arizona, Colorado, New Mexico, and Texas, a fleet of crude oil and finished product truck transports, and wholesale petroleum products operations in Arizona, California, Colorado, Maryland, Nevada, New Mexico, Texas, and Virginia.
Wrc Refining Co sold 807,302 shares on August 22-24.
The company reported the second-quarter financial results on August 2 with the following highlights:
|Net income||$239 million|
Third Quarter 2012 Guidance
El Paso Refinery
|Crude Throughput (bpd)||116,000-120,000|
|Total Throughput (bpd)||125,000-129,000|
|Operating Expenses ($/Bbl)||$4.15|
|Crude Throughput (bpd)||18,000-21,000|
|Total Throughput (bpd)||20,000-23,000|
|Operating Expenses ($/Bbl)||$8.50|
|Expense Interest||$18.2 million|
|Depreciation and Amortization||$23.0 million|
|2012 Full Year Capital Expenditures||$162.1 million|
The stock is trading at a forward P/E of 7.51. The stock has seen heavy insider selling since July 2011. The stock is trading well above its 200 day moving average. I am not currently interested in shorting the stock.
3. Intuit (INTU) is a leading provider of business and financial management solutions for small and mid-sized businesses; financial institutions, including banks and credit unions; consumers and accounting professionals. Its flagship products and services, including QuickBooks, Quicken and TurboTax, simplify small business management and payroll processing, personal finance, and tax preparation and filing. ProSeries and Lacerte are Intuit's leading tax preparation offerings for professional accountants. Intuit Financial Services helps banks and credit unions grow by providing on-demand solutions and services that make it easier for consumers and businesses to manage their money.
Founded in 1983, Intuit had annual revenue of $4.15 billion in its fiscal year 2012. The company has approximately 8,000 employees with major offices in the United States, Canada, the United Kingdom, India and other locations.
- Scott Cook sold 200,000 shares on August 23 via a 10b5-1 trading plan adopted by the reporting person. Scott Cook co-founded Intuit Inc. in 1983 and now serves as the chairman of the Executive Committee.
- Kiran Patel sold 90,000 shares on August 23 via a 10b5-1 trading plan adopted by the reporting person. Kiran Patel is executive vice president and general manager of Intuit's small business group.
- Laura Fennell sold 12,393 shares on August 23 via a 10b5-1 trading plan adopted by the reporting person. Laura Fennell is senior vice president, general counsel and secretary, leading Intuit's legal, corporate affairs, privacy, information and physical security teams.
The company reported the fourth-quarter and full fiscal year 2012, which ended July 31, results on August 21 with the following highlights:
|Net income||$4 million|
|Quarterly dividend||$0.17 per share|
Intuit announced guidance for fiscal year 2013, which ends July 31, and expects:
- Revenue of $4.55 billion to $4.65 billion, growth of 10 to 12 percent.
- GAAP operating income of $1.315 billion to $1.345 billion, growth of 12 to 14 percent.
- Non-GAAP operating income of $1.57 billion to $1.60 billion, growth of 12 to 14 percent.
- GAAP diluted EPS of $2.76 to $2.82, growth of 6 to 8 percent.
- Non-GAAP diluted EPS of $3.32 to $3.38, growth of 12 to 14 percent.
For the first quarter of fiscal 2013, Intuit expects:
- Revenue of $630 million to $640 million, growth of 10 to 11 percent.
- GAAP operating loss of $85 million to $90 million, compared to a loss of $84 million in the year-ago quarter.
- Non-GAAP operating loss of $20 million to $25 million, compared to a loss of $20 million in the year-ago quarter.
- GAAP net loss per share of $0.20 to $0.21, compared to a net loss per share of $0.21 in the year-ago quarter.
- Non-GAAP net loss per share of $0.06 to $0.07, compared to a net loss per share of $0.08 in the year-ago quarter.
The stock has a $46 bearish price objective from the Point and Figure chart. The stock has seen steady insider selling since December 2011. There has not been any insider buying since December 2011. The stock is trading at a forward P/E of 17.39 currently. I am not currently interested in shorting the stock.
4. Facebook's (FB) mission is to make the world more open and connected. People use Facebook to stay connected with friends and family, to discover what's going on in the world, and to share and express what matters to them.
The company reported the second-quarter financial results on July 26 with the following highlights:
|Net loss (GAAP)||$0.08 per share|
|Monthly active users||955 million|
The company did not give any outlook or guidance during the earnings release. David Ebersman, Chief Financial Officer, only commented the following during the conference call:
As we look to the second half of 2012, we're encouraged that the network of people using Facebook continues to grow and their engagement is strong. We remain focused on building out better and deeper social experiences for the people who use Facebook, while at the same time executing on the monetization strategies and initiatives outlined today.
The stock has seen heavy insider selling since the IPO. There has been only one insider buy since the IPO. The stock has fallen 50% since the IPO. I am not interested in shorting the stock from new 52 -week lows.
5. Chico's FAS (CHS), through its brands - Chico's, White House | Black Market, Soma Intimates, and Boston Proper - is a women's specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items.
The Chico's brand offers women a combination of great style, one-of-a-kind details and warm personal service. Chico's currently operates 607 boutiques and 92 outlets throughout the U.S., mails a catalog and offers round-the-clock shopping at chicos.com.
- David Dyer sold 400,002 shares on August 23. David Dyer is the President and Chief Executive Officer of the company, having assumed these officer positions on January 8, 2009.
- Betsy Atkins sold 10,000 shares on August 23. Betsy Atkins has been a director of the company since 2004.
- Sara Stensrud sold 8,000 shares on August 23. Sara Stensrud is Executive Vice President-Chief Human Resources Officer for the company, having joined the company in July 2010.
- Alexander Rhodes sold 2,668 shares on August 23. Alexander Rhodes is Executive Vice President-General Counsel, Chief Compliance Officer and Secretary for the company having joined the company in January 2003.
The company reported the second-quarter financial results on August 22 with the following highlights:
|Net income||$53.4 million|
As a result of the company's record first half results, the company is updating its planning assumptions for fiscal 2012. The new planning assumptions are:
- Net sales of approximately $2.55 billion to $2.6 billion, which includes comparable store growth at a mid-single digit percent;
- Gross margin rate of approximately flat to 2011;
- SG&A expense, as a percentage of net sales, down approximately 50 basis points to 2011;
- One-time acquisition and integration costs for Boston Proper of approximately $4 million pre-tax;
- Effective tax rate of approximately 38%;
- Weighted average diluted shares of approximately 165 million, excluding any potential future impact of share repurchases;
- Inventory increase in-line with sales growth; and
- Capital expenditures of approximately $155 million, reflecting an additional $5 million for Boston Proper initiatives, including new stores in early fiscal 2013 and system integration costs.
The stock has a $29.5 price target from the Point and Figure chart. The stock has seen steady insider selling since June 2011. There has not been any insider buying since June 2011. The stock is currently trading at a forward P/E of 15.18. I am not interested in shorting the stock before $30 level.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.