Analyzing Noteworthy Insider Trades At LinkedIn, Seagate And Other Tech Stocks Last Week

by: GuruFundPicks

We present here three noteworthy insider buys and ten noteworthy insider sells in the tech sector from Wednesday through Friday's (May 2nd, 3rd, and 4th, 2012) over 1,100 separate SEC Form 4 (insider trading) filings, as part of our daily and weekly coverage of insider trades (a prior article on insider trades during the same period in the basic materials & energy sector can be accessed by clicking on the above hyperlink, and successive articles on other insider trades in other sectors can be accessed later from our author page).

The filings are noteworthy based on the dollar amount sold, the number of insiders buying or selling, and based on whether the overall buying or selling represents a strong pick-up based on historical buying and selling in the stock (for more info on how to interpret insider trades, please refer to the end of this article):

LinkedIn Corp. (LNKD): LNKD operates an online professional network via its proprietary social networking platform that enables members to create, manage and share professional identities online, build and engage with their professional network, access shared knowledge and insights, and find business opportunities. On Wednesday and Thursday, five insiders filed SEC Forms 4 indicating that they converted Class B common stock into 224,458 Class A common stock, and sold the resulting Class A common shares for $24.2 million, pursuant to 10b5-1 plans.

As heavy as insider selling has been recently since the expiration of the lockup period last November, the selling last week was still a significant pickup from those levels, as insiders sold about 0.35 million shares each in March and April v/s the 0.22 million shares they sold just in the last three trading days.

LNKD reported a blockbuster Q1 (March) report on Thursday, handily beating analyst revenues and earnings (15c v/s 9c), while also guiding Q2 and FY revenues and adjusted EBITDA above estimates. More notably, it recorded 101% revenue and 150% earnings growth year-over-year, with strength across all key metrics from member signups and engagement to significant revenue growth across all three product lines. A number of brokers, including most notably Cannacord Genuity and Piper Jaffray, raised their targets on the company following the report to the $135-$145 range.

LNKD stock currently trades at 107 forward P/E, and while there is little doubt that its blistering growth will continue in the near-term, the questions really are two-fold. One, while the company is currently defining its category and at the same time growing at the expense of competitors such as Monster Worldwide Inc. (NYSE:MWW), that is seeing falling revenue, are there significant competitive challenges to its intermediate- and long-term growth from both established players such as Google Inc. (NASDAQ:GOOG), Microsoft Corp. (NASDAQ:MSFT) and Facebook (NASDAQ:FB), as well as upcoming new entrants into the marketplace.

And two, even if one believes in the long-term growth scenario that LNKD will build on its dominance of the professional networking space, with new products and services and strong subscriber growth, is all of that growth already baked into the current price. It will be the resolution of these two questions that will decide how LNKD shares fare over the long-term.

Seagate Technology (NASDAQ:STX): Seagate manufactures hard disk drives for the enterprise, desktop, mobile computing and consumer electronics markets. On Thursday, six insiders filed SEC Forms 4 indicating that they exercised options to acquire 415,480 shares, and sold those and an additional 14,597 shares for $13.75 million, with 0.28 million of those shares sold pursuant to 10b5-1 plans. In comparison, insiders sold 5.4 million shares in the past year.

STX has reported back-to-back stellar quarters for Q4 2011 and Q1 2012. The stock has performed well, up about 90% YTD and up to more than three-fold from the lows last October, currently trading at a cheap 3-4 forward P/E and 3.8 P/B, while earnings are projected to keep ratcheting up from $1.24 in 2011 to $9.42 in 2013, at an astounding annual growth rate of 175.6%. Just in the last Q1 (March) quarter, revenues were up 65% and earnings were up 956% year-over-year. However, despite its stellar report, and that also from rival Western Digital Corp. (NYSE:WDC), both stocks are not getting the respect, with WDC trading at a similar just over 4 forward P/E.

The concerns among many is that prices may weaken for hard disk drives going forward, hurting revenues and profits, as well as fears of market share erosion from solid state drives that continue to get cheaper. However, if the company keeps delivering stellar profits like it has recently, it will be difficult to hold the price down for long. Furthermore, the company has also been aggressively buying back shares, thereby reducing its share count that boosts EPS. Also, the company has been in the solid state hybrid drive business for some time, that combines the speed and stability of a solid state drive with the high capacity of a hard disk drive. With its low valuation, high growth, exploding markets for storage needs, share buybacks, and a good 3.1% dividend yield, this stock seems to have something for almost every kind of investor.

On top of these, additional large insider sales last week on Wednesday through Friday in the technology sector included:

  • a $7.3 million sale by Chief Technical Officer Henry Samueli at Broadcom Corp. (BRCM), that provides a portfolio of highly integrated system-on-a-chip and software solutions that enable wired and wireless broadband communications to manufacturers of mobile devices, computing and networking products, and service carriers;
  • a $6.1 million sale by Sr. EVP James Cicconi at AT&T Inc. (NYSE:T), a premier telecom holding company providing local exchange, long distance, network access and wireless services to consumers, businesses, and other providers worldwide;
  • a $4.7 million sale by two insiders at Riverbed Technology Inc. (NASDAQ:RVBD), a provider of products and services that improve applications and accessibility of data over wide area networks or WANs;
  • a $3.6 million sale by three insiders at Equinix Inc. (NASDAQ:EQIX), that provides network-neutral co-location, inter-connection and managed services to enterprises, content providers, financial services companies and network service providers;
  • a $3.6 million sale by SVP Alvaro Monserrat at Citrix Systems Inc. (NASDAQ:CTXS), that develops online application virtualization, networking and performance management software;
  • a $3.0 million sale by EVP Paul Cormier at Red Hat Inc. (NYSE:RHT), that provides open source software solutions to enterprises worldwide, including the Red Hat Linux operating system;
  • a $1.3 million sale by three insiders at Maxim Integrated Products (NASDAQ:MXIM), that is a provider of linear and mixed-signal ICs worldwide; and
  • a $1.0 million sale by two insiders at Zynga Inc (NASDAQ:ZNGA), that develops, markets and operates online social games, making them available worldwide on various platforms, including Facebook, MySpace and Yahoo, as well as the iPad, iPhone and Android devices.

Furthermore, insiders also reported noteworthy buys on Wednesday through Friday of last week in the technology sector in:

  • Sprint Nextel Corp. (NYSE:S), that offers a comprehensive range of wireless and wireline communications products and services to consumer, businesses, and government markets in the U.S., Puerto Rico and the U.S. Virgin Islands, in which CFO Joseph Euteneuer purchased 100,000 shares for $0.25 million, increasing his holdings to 0.92 million shares, and in comparison to 0.25 million shares purchased by insiders in the past year;
  • LSI Corp. (NASDAQ:LSI-OLD), that is a designer of complex high-performance ICs and storage systems, in which Director Charles Haggerty purchased 20,000 shares for $0.16 million, increasing his holdings to 0.12 million shares in direct and indirect shares, and the only insider purchase in the past year; and
  • Maxwell Technologies Inc. (NASDAQ:MXWL), that is a leading developer and manufacturer of innovative, cost-effective storage and power delivery solutions, including the manufacture of high-voltage capacitors, ultra-capacitors and radiation-mitigated micro-electronics, in which two insiders purchased 7,000 shares for $66,950, in comparison to 27,000 shares purchased by insiders in the past year.

Credit: Fundamental data in this article and company descriptions are based on SEC filings, Zacks Investment Research, Yahoo, Thomson Reuters and The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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