Do Insiders Envisage Limited Upside at These Three Companies?

It appears that the U.S. stock indexes are out of correction territory and the bull market resumed its course. The growing likelihood of more stimulus on the European continent and the stronger-than-expected earnings are driving up the market at the moment. All major indexes gained more than one and a half percent on Thursday, so most market participants gradually regain their confidence in equity markets. It is worth pointing out that a potential extension of the ECB quantitative easing efforts diminish the odds of seeing a Fed rate hike by the end of the year. The U.S. dollar noticeably strengthened against the Euro following Mario Draghi’s comments on Thursday, so it seems that the Federal Reserve would be forced to keep interest rates unchanged for quite a while. Having said that, it might be quite hard to find any short-selling opportunities amid a broader market rally, but one should not forget insider selling. At times when almost everyone is bullish on the market, it is hard to ignore the insider selling activity. The Insider Monkey team identified three companies with heavy insider selling, so this article will discuss whether these companies’ insiders fear gloomy prospects in the months ahead.

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Prior to discussing the insider trading activity at those three companies, let’s make you familiar with what Insider Monkey does besides providing high-quality evidence-based articles. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

Moving on to the potential short-selling opportunities, we will start off by investigating the trading activity at Intel Corporation (NASDAQ:INTC). Chairman Andy D. Bryant reported the sale of 23,000 shares on Wednesday at a price of $33.61 per share, all of which were held by a family trust fund. Following the transaction, the family trust currently owns 24,383 shares, while the Chairman holds a direct ownership stake of 518,798 shares. The shares of Intel have gained more than 30% since the end of August, which could serve as explanation on  why the Chairman is unloading his holdings. Even so, the stock is still 5% in the red year-to-date. According to a recent report published by Reuters earlier this week, Intel Corporation (NASDAQ:INTC) intends to invest up to $5.5 billion in its manufacturing facility in Dalian, China, in an attempt to diversify its business beyond the weakening traditional PC market. As stated by a research report by International Data Corporation (IDC), the manufacturers of PCs marketed 71 million units in the third quarter, which marks a decreased of 10.8% year-over-year. Kerr Neilson’s Platinum Asset Management held its position in Intel Corporation (NASDAQ:INTC) unchanged during the second quarter at 11.99 million shares.

The second page of the article will examine the insider selling activity at two strong-performing stocks.

Let’s now refocus our attention on Global Payments Inc. (NYSE:GPN), a provider of payment technology services. Director Gerald J. Wilkins offloaded 1,000 shares on Tuesday for $130.46 each, trimming his stake to 9,500 shares. Global Payments Inc. (NYSE:GPN)’s stock has advanced by over 41% since the beginning of the year, so the Director might have decided to take some profits off the table. The company delivered a solid financial performance in the third quarter, reporting adjusted net revenue of $537.0 million, which was up 8% year-over-year. Similarly, its cash diluted earnings per share increased 25% year-over-year to $1.57. Even more to that, Global Payments increased its full-year earnings per share guidance to the range of $5.77-to-$5.92, which yields a growth of 14%-to-17% relative to last year. It is also worth mentioning that the company announced a two-for-one stock split, which will be achieved in the form of a stock dividend for one additional share for each outstanding share that will be payable on November 2. Israel Englander’s Millennium Management was one of the top stockholders of Global Payments Inc. (NYSE:GPN) within our database at the end of the June quarter, owning nearly 859,000 shares.

Ultimately, we will take a thorough look at the insider selling activity at Ciena Corporation (NYSE:CIEN). James E. Moylan Jr., Senior Vice President, Finance and Chief Financial Officer, reported selling 1,000 shares on Wednesday at a price per share of $23.34. After the recent sale, the executive owns 379,533 shares, which also include unvested restricted stock units and performance stock units. There were other insiders who sold shares recently, but their transactions were conducted under Rule 10b5-1 trading plans, so we eschew from examining those trades. During the third quarter, RBC Capital Markets upgraded Ciena Corporation (NYSE:CIEN) to “Outperform” from “Sector Perform”, and raised its price target to $28 from $26, citing the company’s strong focus on margins and cash flow, diversification of customers and no exposure to the Chinese market. In the meantime, the stock have gained over 21% year-to-date, but it is still hard to stipulate what might have caused the executive to sell shares. William Harnisch’s Peconic Partners LLC added a 831,300-share position in Ciena Corporation (NYSE:CIEN) during the June quarter.

Disclosure: None