JPMorgan: 9 Different Insiders Have Sold Shares This Year

In this article, I will feature one bank that has seen intensive insider selling during the last 30 days. 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%.

JPMorgan Chase & Co. (JPM) provides various financial services worldwide.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of JPMorgan's insider-trading activity during the last 30 days by insider.

Name	Title	Trade Date	Shares Sold	Rule 10b5-1	Current Ownership	Decrease In Ownership
Matthew Zames	COO	Jan 27	76,000	Yes	271,161 shares	21.9%
Gordon Smith	EVP	Jan 27	71,953	Yes	215,857 shares	25.0%
Douglas Petno	Managing Director	Jan 27	21,110	Yes	173,631 shares	10.8%
Marianne Lake	CFO	Jan 27	4,880	Yes	34,153 shares	12.5%
Mary Erdoes	Managing Director	Jan 27	63,802	Yes	261,536 shares	19.6%
John Donnelly	Director HR	Jan 27	9,851	Yes	94,851 shares	9.4%
Ashley Bacon	CRO	Jan 27	3,051	Yes	21,351 shares	12.5%
Daniel Pinto	Managing Director	Jan 29	63,718	Yes	386,120 shares	14.2%
Mark O'Donovan	Controller	Jan 23	7,121	Yes	19,713 shares	26.5%

There have been 321,486 shares sold by insiders during the last 30 days. All these shares were sold pursuant to a Rule 10b5-1 plan.

SEC Rule 10b5-1 is a regulation enacted by the United States Securities and Exchange Commission (SEC) in 2000. The SEC states that Rule 10b5-1 was enacted in order to resolve an unsettled issue over the definition of insider trading, which is prohibited by SEC Rule 10b-5. After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade. This staff interpretation raises the possibility that executives can exploit this safe harbor by entering into 10b5-1 trading plans before they have inside information while retaining the option to later cancel those plans based on inside information.

For example, a CEO of a company could call a broker on January 1 and enter into a plan to sell a particular quantity of shares of his company's stock on March 1, find out terrible news about his company on February 1 that will not become public until April 1, and then go forward with the March 1 sale anyway, saving himself from losing money when the bad news becomes public. Under the terms of Rule 10b5-1(b) this is insider trading because the CEO "was aware" of the inside information when he made the trade. But he can assert an affirmative defense under Rule 10b5-1, because he planned the trade before he learned the inside information.

In general, it is a safer way for an insider to sell shares pursuant to a Rule 10b5-1 trading plan than without it.

Insider selling by calendar month

Here is a table of JPMorgan's insider-trading activity by calendar month.

Month	Insider selling / shares	Insider buying / shares
January 2014	321,486	0
December 2013	0	0
November 2013	22,500	0
October 2013	22,500	0
September 2013	0	0
August 2013	3,434	0
July 2013	170,226	0
June 2013	0	0
May 2013	15,668	301,477
April 2013	148,000	436,859
March 2013	0	0
February 2013	34,000	0
January 2013	91,585	6,750

There have been 829,399 shares sold, and there have been 745,086 shares purchased by insiders since January 2013. The month of January 2014 has seen the most insider selling.

Financials

JPMorgan reported the full-year 2013 financial results on January 14 with the following highlights:

Revenue	$99.8 billion
Net income	$17.9 billion
Book value	$53.25 per share
Tangible book value	$40.81 per share

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(Source: Earnings presentation)

JPMorgan has had declining revenue growth since 2010.

Outlook

JPMorgan expects firmwide adjusted expense to be below $60 billion for 2014.

(click to enlarge)

(Source: Earnings presentation)

Competition

JPMorgan's competitors include Bank of America Corporation (BAC), Barclays (BCS), and Citigroup (C). Here is a table comparing these companies.

Company	JPM	BAC	BCS	C	Industry Average (Money Center Banks)
Market Cap:	208.91B	176.67B	57.54B	145.61B	66.28B
Employees:	251,196	242,117	139,900	251,000	74.25K
Qtrly Rev Growth (yoy):	0.00	0.28	0.21	0.04	0.33
Revenue:	96.38B	85.39B	37.68B	68.76B	26.12B
Operating Margin:	0.28	0.20	0.16	0.29	0.28
Net Income:	16.59B	10.08B	-832.61M	13.18B	N/A
EPS:	4.35	0.90	-0.27	4.42	2.80
P/E:	12.77	18.53	N/A	10.87	13.68
PEG (5 yr expected):	1.60	0.61	16.06	0.51	1.26
P/S:	2.18	2.08	1.54	2.19	2.62

JPMorgan has the second-highest P/S ratio among these four companies.

Here is a table of these competitors' insider-trading activities during the last 12 months.

Company	Insider buying / shares	Insider selling / shares
BAC	40,000	619,300
BCS	N/A	N/A
C	585	47,222

Only JPMorgan has seen intensive insider selling during the last 30 days.

Conclusion

There have been nine insiders selling JPMorgan, and there have not been any insiders buying JPMorgan during the last 30 days. Eight of these nine insiders decreased their holdings by more than 10%. JPMorgan has an insider ownership of 0.10%.

Before going short JPMorgan, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are weak revenue growth, and the intensive insider-selling activity.

Source: JPMorgan: 9 Different Insiders Have Sold Shares This Year

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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