Seeking Alpha
Long/short equity, insider ownership
Profile| Send Message| ()  

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 29. I chose the top five companies with insider selling in dollar terms. Here is a look at the five stocks:

1. Google (GOOG) is a global technology leader focused on improving the ways people connect with information. Google's innovations in web search and advertising have made its website a top internet property and its brand one of the most recognized in the world.

(click to enlarge)

Insider sells

Eric Schmidt sold 50,000 shares on August 29 and 103,193 shares on August 27-28. Eric Schmidt serves as Executive Chairman of Board.

Financials

The company reported the second-quarter financial results on July 19 with the following highlights:

Revenue$12.2 billion
Net income$2.8 billion
Cash$43.1 billion

My analysis

The stock has a $685 price target from the Point and Figure chart which was met yesterday. The stock has seen steady insider selling since July 2012. There has not been any insider buying since at least July 2012. The stock is currently trading at a forward P/E of 13.94. The stock is currently trading very close to its all time high levels. I have a neutral bias for the stock currently.

2. Seagate Technology (STX) is the world leader in hard disc drives and storage solutions.

(click to enlarge)

Insider sells

Stephen Luczo sold 607,231 shares on August 27. Stephen Luczo serves as the Chairman of the Board, CEO and President of the company.

Financials

The company reported the financial results for the fiscal year ended June 29, 2012 with the following highlights:

Revenue$14.9 billion
Net income$2.9 billion
Cash$2.1 billion
Quarterly dividend$0.32 per share

Outlook

Stephen J. Luczo, Chairman, Chief Executive Officer and President commented during the conference call on July 30:

"For the September quarter, we expect to maintain market share, achieve revenue of approximately $4 billion, deliver gross margins exceeding 30% and have operating expenses that remain relatively flat. At this time, we believe the December quarter's addressable market will improve for the September quarter, and these conditions will put us on a path to revenues of at least $17 billion in calendar 2012 and exiting the year with margins above 30%. For fiscal 2013, assuming modest market growth, we are planning to maintain market share and deliver at least 25% annual growth in non-GAAP earnings."

My analysis

The stock has a $62 price target from the Point and Figure chart. The stock has seen steady insider selling since April 2012. There has not been any insider buying since at least April 2012. The stock is currently trading at a P/E ratio of 5.21 and a forward P/E of 4.81. I am not interested in shorting the stock based on the very low P/E ratio of the stock.

3. 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.

(click to enlarge)

Insider sells

Dustin Moskovitz sold 450,000 shares on August 27-29, 450,000 shares on August 22-24 and 450,000 shares on August 17-21. Dustin Moskovitz is a 10% owner according to SEC filings.

Financials

The company reported the second-quarter financial results on July 26 with the following highlights:

Revenue$1.2 billion
Net loss (GAAP)$0.08 per share
Monthly active users955 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.

My analysis

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.

4. Alexion Pharmaceuticals (ALXN) is a biopharmaceutical company focused on serving patients with severe and ultra-rare disorders through the innovation, development and commercialization of life-transforming therapeutic products. Alexion is the global leader in complement inhibition and has developed and markets Soliris (eculizumab) as a treatment for patients with PNH and aHUS, two debilitating, ultra-rare and life-threatening disorders caused by chronic uncontrolled complement activation. Soliris is currently approved in more than 40 countries for the treatment of PNH, and in the United States and the European Union for the treatment of aHUS. Alexion is evaluating other potential indications for Soliris and is developing four other highly innovative biotechnology product candidates, which are being investigated across eight severe and ultra-rare disorders beyond PNH and aHUS.

(click to enlarge)

Insider sells

Patrice Coissac sold 63,483 shares on August 27-28. Patrice Coissac joined Alexion in 2005 and serves as a Corporate Senior Vice President and as President of Alexion Pharma International. Mr. Coissac also leads the company's expanding global operations in Europe, the Middle East and African countries.

Financials

The company reported the second-quarter financial results on July 25 with the following highlights:

Revenue$274.7 million
Net income$94.1 million
Cash$806 million

Outlook

Alexion announced on July 25 that it is raising its 2012 revenue guidance from the previous range of $1.065 to $1.085 billion to the higher range of $1.110 to $1.125 billion. The upward revision reflects continued global growth of Soliris in PNH and growth from the ongoing launch of Soliris in aHUS. 2012 guidance for non-GAAP SG&A is being increased from the previous range of $345 to $355 million, to $360 to $370 million, reflecting continued investment in the growth of the company's global operations. Non-GAAP R&D guidance remains unchanged. Guidance for 2012 non-GAAP earnings per share is being raised, from the previous range of $1.65 to $1.75 per share, to the higher range of $1.78 to $1.88 per share for the year. Shares outstanding are expected to be approximately 203 million in the third quarter and approximately 204 million in the fourth quarter.

My analysis

The stock has a $124 price target from the Point and Figure chart. The stock has seen steady insider selling since November 2011. There has not been any insider buying since at least November 2011. The stock is trading at a P/E ratio of 105.51 and a forward P/E of 40.52 currently. I am not interested in shorting the stock before the $124 level.

5. Salesforce.com (CRM) is the enterprise cloud computing company that is leading customers in their transformation to become social enterprises. Social enterprises are able to connect with customers, partners and employees in entirely new ways. Based on salesforce.com's real-time, multitenant architecture, the company's platform and application services give customers the tools to create a true social front office and revolutionize the way they sell, service, market, collaborate, work, and innovate.

(click to enlarge)

Insider sells

  • Craig Ramsey sold 36,000 shares on August 27-29. Craig Ramsey joined salesforce.com's board of directors in April 2003.
  • Stratton Sclavos sold 800 shares on August 28. Stratton Sclavos serves as a director of the company.

Financials

The company reported the second-quarter financial results on August 23 with the following highlights:

Revenue$732 million
Net loss$9.8 million
Cash$1.8 billion

Outlook

  • Q3 FY13 Guidance: Revenue for the company's third fiscal quarter is projected to be in the range of $773 million to $777 million, an increase of 32% to 33% year-over-year. GAAP net loss per share is expected to be in the range of ($0.27) to ($0.26), while diluted non-GAAP EPS is expected to be in the range of $0.31 to $0.32.
  • Full Year FY13 Guidance: Revenue for the company's full fiscal year 2013 is projected to be in the range of $3.025 billion to $3.035 billion, an increase of 33% to 34% year-over-year. For the company's full fiscal year 2013, GAAP net loss per share is expected to be in the range of ($0.75) to ($0.72) while diluted non-GAAP EPS is expected to be in the range of $1.48 to $1.51.

My analysis

The stock has a $208 price target from the Point and Figure chart. The stock has seen steady insider selling since April 2012. There has not been any insider buying since at least April 2012. The stock is currently trading at a forward P/E of 73.17. I am not interested in shorting the stock before the $208 level.

Source: Top 5 Insider Sells Filed On August 29