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

1. Amgen (NASDAQ:AMGN) discovers, develops, manufactures and delivers innovative human therapeutics. A biotechnology pioneer since 1980, Amgen was one of the first companies to realize the new science's promise by bringing safe, effective medicines from lab to manufacturing plant to patient. Amgen therapeutics have changed the practice of medicine, helping millions of people around the world in the fight against cancer, kidney disease, rheumatoid arthritis, bone disease and other serious illnesses. With a deep and broad pipeline of potential new medicines, Amgen remains committed to advancing science to dramatically improve people's lives.

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Insider sells

Kevin Sharer sold 349,625 shares on September 11 and currently controls 178,945 shares of the company. Kevin Sharer serves as a director of the company.

Financials

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

Revenue$4.45 billion
Net income$1.27 billion
Cash$22.5 billion

Outlook

For the full year 2012, the company expects:

  • Total revenues to be in the range of $16.9 billion to $17.2 billion and adjusted EPS to be in the range of $6.20 to $6.35.
  • Adjusted tax rate to be in the range of 14 percent to 15 percent. Excluding the Puerto Rico excise tax, Amgen still expects the adjusted tax rate for 2012 to be in the range of 19 percent to 20 percent.
  • Capital expenditures to be approximately $700 million.

My analysis

The stock has met its bullish $68 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 March 2012. The stock is trading at a forward P/E of 12.05. I do not recommend shorting the stock based on the low forward P/E ratio.

2. Google (NASDAQ: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

  • Lawrance Page sold 27,778 shares on September 12, 27,778 shares on September 11 and 27,778 shares on September 10 via a Rule 10b5-1 trading plan. Lawrance Page currently holds 25,651,926 shares of the company. Lawrance Page is the CEO of the company.
  • Nikesh Arora sold 1,218 shares on September 12 via a Rule 10b5-1 trading plan. Nikesh Arora serves as SVP and Chief Business Officer of the company.
  • Patrick Pichette sold 1,964 shares on September 10. Patrick Pichette is SVP & Chief Financial Officer of the company.
  • Kavitark Shriram sold 72,604 shares on September 7. Kavitark Shriram serves as a director of the company.
  • Sergey Brin sold 83,334 shares on September 4. Sergey Brin is the Co-Founder of the company.
  • 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 has been met already. The stock has seen steady insider selling this year with 1,760,450 shares sold during the last 6 months. There has not been any insider buying during the last 6 months. The stock is trading at a forward P/E of 13.98. The stock is currently trading very close to its all time high levels. I have a neutral bias for the stock currently.

3. Zillow (NASDAQ:Z) is the leading real estate information marketplace, providing vital information about homes, real estate listings, rental listings and mortgages through its mobile applications and websites, enabling homeowners, buyers, sellers and renters to connect with real estate, rental and mortgage professionals best suited to meet their needs. More than 37 million unique users visited Zillow's mobile applications and websites in July 2012. Zillow operates Zillow.com, Zillow Mortgage Marketplace, Zillow Mobile, Postlets, Diverse Solutions and RentJuice. Zillow is headquartered in Seattle.

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Insider sells

(Information on the company's recent secondary offering here.)

Richard Barton

  • Sept. 12, sold 250,000 shares pursuant to a secondary offering
  • Sept. 10, sold 3,500 shares pursuant to a 10b5-1 plan
  • Sept. 11, sold 1,750 shares pursuant to a 10b5-1 plan
  • Sept. 10, his family trust sold 600 shares pursuant to a 10b5-1 plan
  • Sept. 11, his family sold 300 shares pursuant to a 10b5-1 plan

Lloyd Frink

  • Sept. 11, sold 4,000 shares pursuant to a 10b5-1 plan
  • Sept. 12, sold 200,000 shares pursuant to the secondary offering
  • Sept. 12, sold 4,000 shares pursuant to a 10b5-1 plan
  • Sept. 11, his family trust sold 1,200 shares pursuant to a 10b5-1 plan
  • Sept. 12, his family trust sold 50,000 shares pursuant to the secondary offering
  • Sept. 12, his family trust sold 1,200 pursuant to a 10b5-1 plan

Erik Blachford

  • Sold 75,000 pursuant to a secondary offering.

Financials

The company reported the second-quarter financial results on August 7 with the following highlights:

Revenue$27.8 million
Net income$1.3 million
Cash$69.6 million

Outlook

Zillow is providing revenue and adjusted EBITDA outlook for the third quarter of 2012 as follows:

  • Revenue for the third quarter of 2012 is expected to be in the range of $30.0 to $31.0 million. This represents 60% year-over-year growth at the midpoint of the range over third quarter of 2011 revenue of $19.1 million.
  • Adjusted EBITDA for the third quarter of 2012 is expected to be in the range of $4.75 to $5.25 million, representing 16% of revenue at the mid-point of the range, compared to third quarter of 2011 adjusted EBITDA of $3.7 million, which represented 19% of revenue.

My analysis

The stock has a $71 price target from the Point and Figure chart. The stock is currently trading at a forward P/E of 55.89. The stock has seen steady insider selling since February 2012. There has not been any insider buying since at least February 2012. I would recommend waiting until the $71 price target is hit before shorting the stock.

4. Asbury Automotive Group (NYSE:ABG), headquartered in Duluth, GA, is one of the largest automotive retailers in the U.S., with 2011 revenues over $4 billion. Built through a combination of organic growth and strategic acquisitions, Asbury now operates 79 retail auto stores, encompassing 99 franchises for the sale and servicing of 30 different brands of American, European and Asian automobiles. Over 85% of sales are from import brands.

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Insider sells

Msd Capital L P sold 223,400 shares on September 10-11 and currently controls 3,287,873 shares of the company. Asbury has 31,373,417 shares outstanding which makes Msd Capital L P a 10.5% owner of Asbury.

Financials

The company reported the second-quarter financial results on July 24 with the following highlights:

Revenue$1.2 billion
Net income$21.1 million
Cash$8.7 million

My analysis

The stock has met its $29.5 price target from the Point and Figure chart. The stock has seen steady insider selling since August 2011. There has only been one insider buy transaction since August 2011. The stock is trading at a forward P/E of 10.55. I would not recommend shorting the stock based on the low forward P/E multiple.

5. LinkedIn (NYSE:LNKD) connects the world's professionals to make them more productive and successful. With more than 175 million members worldwide, including executives from every Fortune 500 company, LinkedIn is the world's largest professional network on the Internet. The company has a diversified business model with revenue coming from member subscriptions, marketing solutions and hiring solutions. Headquartered in Silicon Valley, LinkedIn also has offices across the Americas, Europe, and the Asia-Pacific.

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Insider sells

  • Steven Sordello sold 50,000 shares on September 10 via a 10b5-1 trading plan. Steven Sordello is Senior Vice President and Chief Financial Officer of the company.
  • Stanley Meresman sold 1,000 shares on September 11-12 via a 10b5-1 trading plan. Stanley Meresman serves as a director of the company.
  • Jeff Weiner sold 74,584 shares on September 4 and currently holds 100,902 shares of the company. Jeff Weiner is the CEO of LinkedIn.
  • Dipchand Nishar sold 77,808 shares on September 4-5 and currently holds 50,000 shares of the company. Dipchand Nishar serves as Senior Vice President, Products and User Experience.
  • Reid Hoffman sold 78,667 shares on September 4 via 10b5-1 trading plan. Reid Hoffman serves as a director of the company.

Financials

The company reported the second-quarter financial results on August 2 with the following highlights:

Revenue$228.2 million
Net income$2.8 million
Cash$617.2 million

Outlook

On August 2 LinkedIn provided guidance for the third quarter of 2012, and revised guidance upwards for the full year of 2012 on revenue, adjusted EBITDA, and stock-based compensation, while narrowing the full-year outlook for depreciation and amortization.

  • Q3 2012 Guidance: Revenue for the third quarter of 2012 is projected to range between $235 million to $240 million. The company expects adjusted EBITDA to range between $42 million and $45 million. The company expects stock-based compensation to range between $27 and $28 million and depreciation and amortization to range between $20 million and $22 million.
  • Full Year 2012 Guidance: The company has revised its expected revenue range upward to $915 million to $925 million from the prior range of $880 million to $900 million. The company has also revised upward its expected adjusted EBITDA range to $185 million to $190 million from the prior range of $170 million to $175 million. The company now expects stock-based compensation to range between $85 million and $95 million, while the range for depreciation and amortization is now $75 million to $80 million.

My analysis

The stock has a $153 price target from the Point and Figure chart. The stock has seen steady insider selling since June 2012. There has not been any insider buying since at least June 2012. The stock is currently trading at a forward P/E of 94.13. I would recommend waiting until the $153 level before shorting the stock.

Source: Top 5 Insider Sells Filed On September 12