4 Stocks With Recent Intensive Insider Selling

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Insiders tend to buy more often than usual before large price increases and to sell more than usual before price decreases. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

In this article, I will feature four companies that have seen intensive insider selling during the last 30 days.

1. Fresh Del Monte Produce (NYSE: FDP). The company engages in production, marketing, and distribution of fresh-cut fruit and vegetables worldwide. There have been five different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. All five of these insiders decreased their holdings by more than 10%. The company has a relatively high insider ownership of 15.30%.

Fresh Del Monte Produce has the highest P/S ratio among the three major players in the sector. The other two companies are Chiquita Brands International and Dole Food Company. Fresh Del Monte Produce's earnings per share for the first quarter were down 34.3% compared to the first quarter of 2012. There is one analyst buy rating, two neutral ratings and zero sell ratings with an average target price of $27.00. The average analyst EPS estimate for the current year is $1.70 compared to the reported EPS of $2.46 for 2012. I believe the three main reasons for the recent intensive insider selling are the bearish analyst target prices, relatively high P/S ratio and the weak first quarter earnings.

<img alt="" src="http://g.fool.com/editorial/images/57822/chart_large.png" />

2. Atwood Oceanics (NYSE: ATW). The company is an offshore drilling contractor. There have been three different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. Two out of the three insiders decreased their holdings by more than 10%. The company has an insider ownership of 6.58%.

The company earned net income of $85.5 million or $1.28 per diluted share, on revenues of $253.2 million for the quarter ended March 31, 2013 compared to net income of $72.8 million or $1.10 per diluted share on revenues of $245.1 million for the quarter ended December 31, 2012. There are 19 analyst buy ratings, seven neutral ratings and one sell rating with an average target price of $61.20. The average analyst EPS estimate for the current fiscal year is $5.18 compared to the reported EPS of $4.14 for the fiscal year 2012. I believe the main reason for the recent intensive insider selling is profit taking.

<img alt="" src="http://g.fool.com/editorial/images/57822/chart_1_large.png" />

3. Yelp (NYSE: YELP). The company operates Yelp.com, an online urban city guide that helps people find places to eat, shop, drink, relax, and play based on the informed opinions of a community of locals in the know. There have been five different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. Three out of the five insiders decreased their holdings by more than 10%. The company has an insider ownership of  2.80%.

Yelp is trading at three times higher P/S ratio than its direct competitor Yahoo. Yelp's net revenue was $46.1 million in the first quarter of 2013, reflecting 68% growth in net revenue from the first quarter of 2012. There are six analyst buy ratings, 13 neutral ratings and zero sell ratings with an average target price of $31.98. The average analyst EPS estimate for the current year is -$0.15 compared to the reported EPS of -$0.33 for 2012. I believe the three main reasons for the recent intensive insider selling are the bearish analyst target prices, relatively high P/S ratio and the negative earnings.

<img alt="" src="http://g.fool.com/editorial/images/57822/chart_2_large.png" />

4. Synopsys (NASDAQ: SNPS). The company provides core electronic design automation solutions primarily in the United States, Europe, Japan, and the rest of Asia Pacific. There have been three different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. Two out of the three insiders decreased their holdings by more than 10%. The company has an insider ownership of 0.70%. 

For the second quarter of fiscal year 2013, Synopsys reported revenue of $499.3 million, compared to $432.6 million for the second quarter of fiscal 2012, an increase of 15 percent. There are six analyst buy ratings, zero neutral ratings and zero sell ratings with an average target price of $41.17. The average analyst EPS estimate for the current fiscal year is $2.42 compared to the reported EPS of $2.10 for the fiscal year 2012. I believe the main reason for the recent intensive insider selling is profit taking.

<img alt="" src="http://g.fool.com/editorial/images/57822/chart_3_large.png" />

Conclusion

All four of these companies have seen intensive insider selling during the past 30 days. I believe Yelp and Fresh Del Monte Produce carry the highest risk for the longs at the moment. If you are long any of these four stocks, you might want to consider taking some profits at the current level just like the insiders are doing currently.


Markus Aarnio has no position in any stocks mentioned. The Motley Fool recommends Atwood Oceanics. The Motley Fool owns shares of Atwood Oceanics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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