Cisco Systems Inc. (CSCO), Ross Stores Inc. (ROST) and Others Witness Increased Insider Selling Lately

The dollar volume of both insider buying and selling decreased quite dramatically last week, partly because of the holiday-shortened week. Nonetheless, the four-day workweek does not fully explain the huge decline in insider trading activity. The end of the first quarter of 2016 is a few days away and the first-quarter earnings season is set to kick off in early April, so some companies may be entering their quiet periods prior to quarterly earnings announcements. Therefore, it is no wonder why insider trading activity on both the buy and sell side slowed significantly last week. However, it should be noted that insider buying decreased more significantly than insider selling last week, so the ratio insider selling to insider buying ratio increased quite notably relative to the previous week. In fact, corporate insiders sold around 16-times the dollar volume of purchases during last week, versus a ratio of roughly five registered for the prior week. Leaving the discussion about insider trading trends aside, let’s proceed to the discussion of several noteworthy insider sales recently witnessed at three companies.

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Cisco Systems Inc. (NASDAQ:CSCO) had three different insiders unload shares last week, one of whom sold only freshly-exercised stock options. So let’s take a look at the company’s insider selling that was not conducted under pre-arranged trading plans or associated with stock options. To start with, Chris Dedicoat, Executive Vice President of Worldwide Sales, sold 31,800 shares on Thursday at prices that ranged from $27.93 to $27.94 per share, cutting his overall holding to 346,253 shares. Pankaj Patel, Executive Vice President and Chief Development Officer of Global Engineering, offloaded 20,000 shares on Tuesday, 3,000 shares on Wednesday, and 12,814 shares on Thursday at prices that fell between $27.90 and $28.28 per share, all of which were held through a trust fund called Trust #1. Mr. Patel, set to leave Cisco Systems Inc. (NASDAQ:CSCO) in the second half of 2016, holds a direct ownership of 406,307 shares and owns an additional 297,388 shares through Trust #1 (141,015 shares), Trust #2 (128,005 shares), and Trust #3 (28,368 shares).

The network giant designs and markets a wide variety of products, offers services and integrated solutions aimed at developing and connecting networks around the world. The company’s growth strategy involves buying up small tech companies rather than channeling massive capital towards research and development activities. Cisco Systems usually acquires in excess of ten companies each year and 2016 is not going to be an exception. At the beginning of the previous week, Cisco’s Chief Executive Officer, Chuck Robbins, announced the reorganization of the company’s engineering units into four new teams: Networking and Market Segments; Cloud Services and Platform; IoT and Applications; and Security. The freshly-announced move will most likely enable the company to focus on key areas of growth, some of which are facing fast-toughening competition. Just recently, Rod Hall, analyst at J.P. Morgan, said that Alphabet Inc. (NASDAQ:GOOGL)’s Google division is anticipated to announce new customer wins for its Google Cloud Platform, suggesting that Cisco’s position in the cloud space might be suffering as a result. “We note that this is one of the primary drivers of data center infrastructure commoditization, in our opinion, which we believe is ultimately negative for Cisco and other data center infrastructure exposed companies”, said the analyst in a note. Shares of Cisco have gained almost 3% since the beginning of 2016, fully recovering from the major pullback experienced at the beginning of the year. The smart money sentiment towards the network giant declined in the fourth quarter of 2015, as the number of funds with stakes in the company dropped to 60 from 67 quarter-over-quarter. Donald Yacktman’s Yacktman Asset Management cut its stake in Cisco Systems Inc. (NASDAQ:CSCO) by 15% during the October-to-December period to 31.04 million shares.

The next pages of this insider trading article discuss the insider selling activity registered at Ross Stores Inc. (NASDAQ:ROST) and DexCom Inc. (NASDAQ:DXCM).

Ross Stores Inc. (NASDAQ:ROST) saw two top-tier executives sell sizable blocks of shares last week. Michael B. O’Sullivan, President and Chief Operating Officer, discarded 38,000 shares on Tuesday and 20,163 shares on Wednesday at prices varying from $57.95 to $58.29 per share. Following the recent sales, Mr. O’Sullivan continues to hold a direct ownership stake of 419,478 shares. Bernard G. Brautigan, President of Merchandising, sold 24,586 units of common stock last Monday at a weighted average price of $58.35, trimming his ownership to 202,258 shares.

Ross Stores is the largest off-price apparel and home fashion chain in the United States, operating stores under Ross Dress for Less and dd’s DISCOUNTS brand names. Ross Stores has enjoyed a great stock and financial performance in the past several years, with its shares being up 10% in the past year alone. The company generated sales of $11.94 billion for fiscal 2015 that ended January 30, which increased from $11.04 billion reported for the previous year. Ross Stores’ management anticipates same-store sales growth in the range of 1%-to-2% for fiscal 2016 that ends January 28, 2017. Similarly, the management expects fiscal 2016 earnings per share in the range of $2.59 to $2.71 per share, which denotes an increase of 3% to 8% from the figure reported for fiscal 2015. Just recently, analysts at Goldman Sachs downgraded Ross Stores to ‘Neutral’ from ‘Buy’ and removed the company from its conviction list, saying that there is only 6% upside to its price target of $61. Nonetheless, analysts at Goldman Sachs “continue to view Ross Stores as a long-term secular winner, and fundamentals should benefit near term as excess inventory in the apparel channel provides better buying opportunities”. Shares of Ross Stores are currently trading around 18.9-times expected earnings, versus the forward P/E multiple of 20.2 for the Apparel Retail industry. The hedge fund sentiment towards Ross Stores declined significantly in the December quarter, with the number of funds invested in the company shrinking to 33 from 40 during the three-month period. David Harding’s Winton Capital Management reported owning 1.02 million shares of Ross Stores Inc. (NASDAQ:ROST) through its 13F for the fourth quarter.

Let’s wrap up our discussion by analyzing the insider trading activity witnessed at DexCom Inc. (NASDAQ:DXCM). Executive Chairman Terrance H. Gregg unloaded 25,000 shares on Tuesday at $59.51 apiece, all of which were held in a trust fund that currently owns 276,064 shares. According to the Form 4 filing that disclosed this transaction, Mr. Gregg contributed the aforementioned block of shares to an exchange fund in exchange for shares of the exchange fund. Therefore, the Executive Chairman, who also holds a direct ownership stake of 477,328 shares, may be seeking to diversify his holdings, so the recent transaction should not serve as reason for concern among investors. The company registered massive insider selling in recent weeks and months, most of which, though, was conducted under pre-arranged trading plans.

DexCom is a medical device company that mainly focuses on designing and commercializing continuous glucose monitoring (CGM) systems used by people suffering with diabetes, as well as healthcare providers. The company has seen its shares advance 268% in the past five years, so the high insider trading activity on the sell side might not seem surprising. Nonetheless, the share price of the company’s stock has been on a slide late September, having declined 26% since the beginning of this year. DexCom’s 2015 product revenue reached $400.7 million, up from $257.1 million in 2014 and $157.1 million in 2013. The increase in the company’s top-line figure was mainly driven by higher sales volume of its disposable sensors, which were positively affected by the sustained growth in the installed base of customers using G4 PLATINUM and G5 Mobile systems and durable systems to existing and new customers. It is worth mentioning that the company’s product revenues are derived from the sale of durable CGM systems and disposable sensors. Each sensor is used continuously for approximately seven days, after which it should be replaced with a new disposable sensor. Therefore, the company’s top-line growth mainly depends on recurring sales of its disposable sensors, so its ability to grow its installed base of customers is of crucial importance. According to fresh estimates from the International Diabetes Federation, the number of individuals suffering with diabetes is anticipated to reach 642 million by 2040, up from a current number of 415 million. Hence, DexCom appears to be well-positioned to keep growing in the years and decades ahead. There were 34 hedge funds from our system with stakes in DexCom at the end of the fourth quarter, as compared to 30 registered at the end of the previous one. Jim Simons’ Renaissance Technologies owned 693,943 shares of DexCom Inc. (NASDAQ:DXCM) at the end of December 2015.

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