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 7. I chose the top five companies with insider selling in dollar terms. Here is a look at the five stocks:
1. LyondellBasell (LYB) is one of the world's largest plastics, chemical and refining companies and a member of the S&P 500 Index. LyondellBasell manufactures products at 58 sites in 18 countries. LyondellBasell products and technologies are used to make items that improve the quality of life for people around the world including packaging, electronics, automotive parts, home furnishings, construction materials and biofuels.
Apollo Management Holdings sold 17,500,000 shares on September 7 via a public offering. Apollo Management Holdings currently control 153,632,110 shares of LyondellBasell. LyondellBasell has 574,954,832 shares outstanding which makes Apollo Management Holdings a 26.7% owner of LyondellBasell.
The company reported the second-quarter financial results on July 27 with the following highlights:
|Net income||$768 million|
Jim Gallogly, LyondellBasell Chief Executive Officer commented on July 27:
"While we expect global economic uncertainty to continue and related volatility to limit our near-term visibility, we remain focused on the fundamentals. In North America, current ethane and propane raw material prices position our North American olefins business to remain advantaged relative to global ethylene producers. On the other hand, our European olefins and polyolefins business will be challenged, and thus we will continue efforts to improve our relative cost position.""Safe and reliable operations, proprietary technologies, and access to low cost feedstocks in the U.S. and Middle East position us well to generate strong earnings and free cash flow. LyondellBasell is poised to move forward to a new chapter in which we are pursuing growth projects targeted to take advantage of opportunities created by North America's shale gas development."
The stock has a $50 price target from the Point and Figure chart. The stock has seen steady insider selling this year. The latest insider buy transaction was in July 2012. The stock is trading at a forward P/E of 8.86. The stock is just $0.5 shy of the $50 price target which is also a new all time high for the stock. The stock could be a short candidate from the $50 level.
2. 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.
Dustin Moskovitz sold 5,700,000 shares on September 5-7, 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.
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 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 52 -week lows.
3. Lamar Advertising (LAMR) operates billboards and other outdoor advertising in 44 states, Canada and Puerto Rico, as well as a logo business in 22 states and Canada. It also has 60 transit advertising franchises in the U.S., Canada and Puerto Rico that place ads on buses and bus shelters.
The company reported the second-quarter financial results on August 8 with the following highlights:
|Net income||$13.9 million|
For the third quarter of 2012 the company expects net revenue to be approximately $303 million to $306 million. On a pro forma basis this represents an increase of approximately 1% to 2%.
The stock has a $58 price target from the Point and Figure chart. There has been steady insider selling this year. The latest insider buy transaction is from October 2011. The stock is trading at a forward P/E of 55.69. I would recommend waiting until the $58 level before shorting the stock.
4. Jamba (JMBA) is a holding company which owns and franchises, on a global basis, Jamba Juice stores through its wholly-owned subsidiary. Jamba Juice company is a leading restaurant retailer of better-for-you, specialty beverage and food offerings, which include great tasting, whole fruit smoothies, fresh squeezed juices and juice blends, teas, hot oatmeal, breakfast wraps, sandwiches and mini-wraps, California Flatbreads, frozen yogurt, and a variety of baked goods and snacks. Jamba-branded products for at-home enjoyment are also available through select retailers across the nation and in Jamba outlets. As of July 3, 2012, there were 783 store locations globally, consisting of 305 company-owned and operated stores and 448 franchise-operated stores in the United States and 30 international stores.
Andrew Heyer sold 7,800,000 shares on September 5-6. Andrew Heyer serves as a director of the company.
The company reported the second-quarter financial results on August 1 with the following highlights:
|Net income||$4.1 million|
The company expects to achieve the following results for its fiscal 2012:
- Deliver positive company-owned comparable store sales of 4-6%;
- Achieve adjusted operating profit margin of 20-23%;
- Develop 40-50 U.S. locations, plus up to 15 new stores at international locations, all excluding JambaGo units;
- Maintain general and administrative expenses flat, in dollars with fiscal 2011, excluding performance compensation;
- Deliver CPG licensing revenue of approximately $3 million.
The stock has seen only insider selling this year. The latest insider buy transaction was in August 2011. The stock is trading at a forward P/E of 25. I am not recommending shorting this stock before $3 level which is the top of the rising trend channel.
5. Fiserv (FISV) is a leading global technology provider serving the financial services industry. Fiserv is driving innovation in payments, processing services, risk and compliance, customer and channel management, and business insights and optimization. For six of the past eight years, Fiserv ranked No. 1 on the FinTech 100, an annual international listing of the top technology providers to the financial services industry.
Donald Dillon sold 112,449 shares on September 6-7 and currently holds 1,757,904 shares of the company. Donald Dillon serves as a director of the company.
The company reported the second-quarter financial results on July 30 with the following highlights:
|Net income||$161 million|
Fiserv expects 2012 adjusted revenue growth to be in a range of 4 to 6 percent and adjusted internal revenue growth to be in a range of 3.0 to 4.5 percent. The company expects 2012 adjusted earnings per share to be in a range of $5.08 to $5.20, which represents growth of 11 to 14 percent over $4.58 in 2011.
The stock has a $84 price target from the Point and Figure chart. The stock has seen steady insider selling this year. The latest insider buy transaction is from August 2011. The stock is currently trading at a forward P/E of 12.62. I would recommend waiting until the $84 price target is hit before shorting this stock.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.