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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 September 4. I chose the top five companies with insider selling in dollar terms. Here is a look at the five stocks:

1. Apple (AAPL) designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.

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Insider sells

Millard Drexler sold 25,000 shares on August 31 and currently holds 584 shares of the company. Millard Drexler serves as a director of the company.

Financials

The company reported its fiscal 2012 third-quarter (ended June 30, 2012) financial results on July 24 with the following highlights:

Revenue$35.0 billion
Net income$8.8 billion
Cash$117.2 billion

Outlook

Peter Oppenheimer, Apple's CFO commented on July 24:

"Looking ahead to the fourth fiscal quarter, we expect revenue of about $34 billion and diluted earnings per share of about $7.65."

My analysis

The stock has a $875 price target from the Point and Figure chart. The stock has seen steady insider selling since August 2011. The last insider buy transaction was in November 2011. The stock is currently trading at a forward P/E of 12.86. I am not interested in shorting the stock before the $875 level.

2. 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.

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Insider sells

  • John Doerr sold 12,285 shares on September 4. John Doerr serves as a director of the company.
  • John Hennessy sold 74 shares on September 4. John Hennessy serves as a director of the company.
  • 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 last week. 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 trading at a forward P/E of 13.78. The stock is currently trading very close to its all time high levels. I have a neutral bias for the stock currently.

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.

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Insider sells

Dustin Moskovitz sold 450,000 shares on August 30 - September 4, 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 only been one insider buy transaction since the company became public. The stock has fallen 50% since the IPO. I am not interested in shorting the stock from new 52 -week lows.

4. Align Technology (ALGN) designs, manufactures and markets Invisalign, a proprietary method for treating malocclusion, or the misalignment of teeth. Invisalign corrects malocclusion using a series of clear, nearly invisible, removable appliances that gently move teeth to a desired final position. Because it does not rely on the use of metal or ceramic brackets and wires, Invisalign significantly reduces the aesthetic and other limitations associated with braces. Invisalign is appropriate for treating adults and teens. Align Technology was founded in March 1997 and received FDA clearance to market Invisalign in 1998. The Invisalign product family includes Invisalign, Invisalign Teen, Invisalign Assist, Invisalign Express 10, Invisalign Express 5, and Vivera Retainers.

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Insider sells

Joseph Lacob sold 145,905 shares on August 30-31 and currently controls 746,992 shares of the company. Joseph Lacob serves as a director of the company.

Financials

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

Revenue$145.6 million
Net income$28.5 million
Cash$304.0 million

Outlook

For the third quarter of 2012, Align Technology expects net revenues to be in a range of $136.8 million to $140.8 million. Invisalign clear aligner case shipments for Q3 12 are expected to be in a range of 94.8 to 96.3 thousand cases, which reflect a year-over-year increase of 19.5% to 21.3%. GAAP earnings per diluted share for Q3 12 is expected to be in a range of $0.26 to $0.28. Non-GAAP earnings per diluted share for Q3 12 is expected to be in a range of $0.27 to $0.29.

Commenting on Align's Q3 12 business outlook, Ken Arola, Align CFO said:

"Total net revenues for the third quarter of 2012 will be impacted by lower Invisalign ASPs resulting from revenue deferrals associated with the Invisalign Teen/Vivera Retainer promotion, Advantage volume rebates, and headwinds from foreign exchange rates. Our Q3 12 outlook for Invisalign case shipment growth of 19.5% to 21.3% year-over-year is an important metric pointing to the continued progress and strength of the business."

My analysis

The stock has a $47 price target from the Point and Figure chart. The stock has seen steady insider selling since February 2012. There has not been any insider buying since at least December 2011. The stock is currently trading at a forward P/E of 25.49. I am not interested in shorting the stock before the $47 level.

5. Amazon.com, Inc. (AMZN), a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers the Earth's Biggest Selection. Amazon.com, Inc. seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. Amazon.com and other sellers offer millions of unique new, refurbished and used items in categories such as Books; Movies, Music & Games; Digital Downloads; Electronics & Computers; Home & Garden; Toys, Kids & Baby; Grocery; Apparel, Shoes & Jewelry; Health & Beauty; Sports & Outdoors; and Tools, Auto & Industrial.

Amazon Web Services provides Amazon's developer customers with access to in-the-cloud infrastructure services based on Amazon's own back-end technology platform, which developers can use to enable virtually any type of business. The new latest generation Kindle is the lightest, most compact Kindle ever and features the same 6-inch, most advanced electronic ink display that reads like real paper even in bright sunlight. Kindle Touch is a new addition to the Kindle family with an easy-to-use touch screen that makes it easier than ever to turn pages, search, shop, and take notes - still with all the benefits of the most advanced electronic ink display.

Kindle Touch 3G is the top of the line e-reader and offers the same new design and features of Kindle Touch, with the unparalleled added convenience of free 3G. Kindle Fire is the Kindle for movies, TV shows, music, books, magazines, apps, games and web browsing with all the content, free storage in the Amazon Cloud, Whispersync, Amazon Silk (Amazon's new revolutionary cloud-accelerated web browser), vibrant color touch screen, and powerful dual-core processor.

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Insider sells

Jeffrey Bezos sold 16,783 shares on August 30 via a Rule 10b5-1 trading plan adopted by the reporting person. Jeffrey Bezos currently holds 87,963,414 shares of the company. The company has 452,065,256 shares outstanding which makes Jeffrey Bezos a 19.5% owner of Amazon. Jeffrey Bezos serves as President, Chief Executive Officer and Chairman of the Board of Amazon. Jeff Bezos founded Amazon.com in 1994.

Financials

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

Revenue$12.83 billion
Net income$7 million
Cash$2.3 billion

Outlook

Third quarter 2012 guidance:

  • Net sales are expected to be between $12.9 billion and $14.3 billion, or to grow between 19% and 31% compared with third quarter 2011.
  • Operating income (loss) is expected to be between $(350) million and $(50) million, down from $79 million in the comparable prior year period.
  • This guidance includes approximately $275 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions, investments or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

My analysis

The stock has met its bullish price target of $210 from the Point and Figure chart. The stock has seen steady insider selling since September 2011. There has only been one insider buy transaction since September 2011. The stock is trading at a forward P/E of 104.15. The stock is currently trading at all time high. The stock could be a good short candidate but I can't give a good stop loss level for the stock at present time.

Source: Top 5 Insider Sells Filed On September 4