Insider Trading in Salesforce.com, Inc. (CRM) Shares

Craig Ramsey, long-time director at salesforce.com, inc. (NYSE:CRM), recently sold off nearly 25% of his shares per a Form 4 filing earlier this week. The filing showed that Ramsey sold off over 74,000 shares in the range of $155-$160 a piece. Ramsey netted around $11.7 million on the sales and now owns 236,000 shares.

We track insider transactions because we believe that no one knows a company better than the people who work there. It has been shown that insiders tend to outperform the market by as much as 7% annually (read more about how this strategy can boost your returns). The insider sentiment for Salesforce has been bearish of late – in looking over our database of insider buys and sales, we find that a number of other insiders have also been dumping shares of the social enterprise company. The question for investors becomes whether there a fundamental issue with the company or are insiders simply looking to lock in profits given the tech company is up 50% year to date.

Ken Fisher - FISHER ASSET MANAGEMENT

Despite the insider sales, it appears that top hedge funds are finding value in Salesforce. Salesforce saw billionaire investor and manager of Citadel Investment Group, Ken Fisher up his shares owned by over 750% during 3Q (check out Fisher’s newest stock picks). Salesforce is a leading customer relationship management software provider that currently trades at a forward P/E of 80x, well above other application software peers, such as Citrix (33x) and Compuware (27x). We do not believe this necessarily makes a Salesforce a poor investment. The long-term growth prospects remain strong for the tech company – expected to grow five-year earnings at over 25% annually – on the back of a rise in corporate spending for application software.

The estimates for operating loss per share is expected to narrow from $0.30 in fiscal year 2013 to $0.08 in 2014 and revenues for 2013 are also expected to be up nicely, with an expected growth of 34%. The CRM company also saw a recent upgrade at Piper Jaffray on signs that company momentum has been outpacing the slower IT spending.

Other big name software as a service tech companies include Oracle Corporation (NASDAQ:ORCL), BMC Software (NASDAQ:BMC), Adobe Systems Incorporated (NASDAQ:ADBE) and Intuit Inc. (NASDAQ:INTU). Oracle has a vast service offering that is expected to help boost revenues 3% in 2013, mainly driven by new software licenses. Oracle also has vast synergistic opportunities for offering hardware related to its acquisition of Sun Microsystems. This tech giant has been looking for renewed ways of generating growth and this includes robust acquisition activity in the cloud computing space. Oracle was one Seth Klarman’s value picks in 3Q – author of Margin of Safety and manager of one of the largest hedge funds Baupost Group (check out all of Klarman’s value plays).

BMC is expected to see more robust revenue growth than Oracle, expected to be up 4% in 2013. This will be driven by the software company’s increased interest in cloud computing. BMC trades a bit above the larger more stable tech companies at 20x earnings, but its 10x forward P/E makes it a very attractive opportunity. Billionaire Paul Singer of Elliott Management is a big fan of BMC, having over 15% of his fund’s 13F invested in the software company during 3Q (see all of Singer’s new stock picks here).

Abode is another tech giant, much like Oracle, seeking a new way to drive growth. Although some of its 5% expected revenue growth in 2013 will come from current clients migrating to new versions of products, the majority of growth should be fueled by acquisitions. Adobe trades well north of its other large tech peers at 24x earnings, but investors still might be overlooking next year’s bottom line as the company only trades at 14x forward EPS.

Intuit is expected to have some of the more robust revenue growth for 2013 at 9%, mainly driven by its small business segment, which makes up 40% of revenues. Intuit is the market leader for small business services and acquired Demandforce earlier this year, which will further broaden its footprint to offer its clients services for client retention.

We believe Salesforce is a market leader that has been making aggressive acquisitions that should fuel its future growth. There is still value to be found in Salesforce given the relative infancy of the SaaS market and the gradual shift in appreciation for customer relationships.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!