Urban Outfitters’ price action should also be analyzed. The retailer’s share price has traded in a wide range from $25.43 to $44.15 over the past 52 weeks, and although the price is up an impressive 35% in the past year, it appears to have stalled out more recently, up only 0.13% year-to-date. The price broke below its 50-day SMA in mid February, and is trading below the 9-day SMA as well. More importantly, the price is down approximately 6.45% since Urban Outfitters’ recent earnings announcement. Additionally, the price has bounced off the lower RSI level of 30 twice recently, indicating an oversold condition, with the general trend appearing to be downward.
When viewing the totality of the circumstances with the Company, there are some bearish indicators, combined with a large insider sale by the current CEO. Additionally, the stock has been volatile in the past year. Investors should continue to monitor future earnings surrounding Urban Outfitters, and watch for any indicators that may support bearish insider behavior.
Webster Financial Corporation (NYSE:WBS)
Webster Financial Corporation (NYSE:WBS), meanwhile, is another company with recent heavy insider sales. Webster Financial Corporation (NYSE:WBS) is a regional commercial bank providing banking, mortgage, financial planning, trust and investment services. Insiders have sold 8.129 million shares over the past three months, with insider buys of only 4,610 shares over the same time frame.
The Company reported recent earnings with net income of $47.9 million for Q4 of 2012, versus net income of $41.7 million for the same prior year quarter. Webster Financial Corporation (NYSE:WBS) currently has a modest dividend yield of 1.65%, but some hedgies were extraordinarily bullish, even in the face of insider selling.
Our records indicate that Citadel Investment Group—managed by billionaire Ken Griffin—increased its holdings of Webster Financial by 213% according to its most recent SEC 13F filing. The Company has a fairly high short interest of 2.5 million shares, representing a short float of 3.22%. The entire share float totals 84.17 million shares, such that the recent insider sales constitute 9.6% of the Company’s float.
Webster Financial’s share price has performed well, rising over 18% since the start of 2013, but since this is near multi-year highs, a possible pullback is at least in the realm of possibility. With insiders selling heavily, investors may want to temporarily avoid this stock. Webster Financial does not appear to be that strong of a short candidate at this time, but depending on how the additional insider shares impact the price on the market, it may be a prime candidate in the near term future. Investors may wish to examine First Niagara Financial Group Inc. (NASDAQ:FNFG), with a stronger dividend yield of 3.62%, as an alternative investment opportunity.
In conclusion, Urban Outfitters and Webster Financial provide examples of companies where heavy insider selling could be a signal of insiders’ decreased confidence in the future performance of their businesses. By performing significant due diligence, investors may be able to determine whether the insiders are merely diversifying their risk as an savvy investment move, or whether they believe future performance is in jeopardy.
Disclosure: none
