Why Are Insiders Selling Garmin?

Are insiders taking the recent run up in Garmin Ltd. (NASDAQ:GRMN) as a chance to get out before a slowdown in unit sales volume takes its long-term toll on the company? Garmin is a provider of navigation devices, but has faced stiff competition from mobile phone based navigation of late. According to the latest round of 13F filings with the SEC, Robert Joseph Caruso with Select Equity Group increased his position by 37%, while Jim Simons with Renaissance Technologies initiated a position in the stock during the second quarter. Overall, the second quarter hedge fund activity in Garmin was positive. See all funds owning Garmin.

RENAISSANCE TECHNOLOGIES

However, since the end of June the company is up over 10% and insiders have been selling throughout August and into September; most notably CEO Min Kao and Director Donald Eller. The stock sales range between $40-$42 a share, while it is currently trading just above the $42 mark. Nine different insiders have sold off shares so far this year, with the earliest insider purchase we have on record being as far back as mid-2009.

Garmin competes with the likes of TomTom NV (AMS:TOM2) and Harman International Industries Inc. (NYSE:HAR). TomTom is Garmin’s closest pure GPS competitor, but Garmin has aggressively taken market share from the company in recent years. TomTom now trades below $4 and is down almost 80% from its 2005 IPO price. While Garmin trades at a P/E of 14, TomTom trades at a 36 and Harman at 11. Harman is also below TomTom and Garmin on a P/S basis at 0.8, versus TomTom’s 1.4 and Garmin’s 2.8.

The company impressed hedge funds and other investors with its recent positive string of EPS estimate beats. For the fourth quarter of 2011, Garmin posted EPS of $0.85 versus estimates of $0.68; the company also beat first quarter estimates of $0.43 by posting $0.45, and then beat estimates by over 50% for the second quarter, posting EPS of $0.98 versus estimates of $0.63.

Although the company has managed to beat expectations of late, Garmin has seen continued volume decline, namely due to pressures from mobile devices. The volume decline will likely continue as phones with native navigation programs become standard, as well as, the standardization of built-in GPS systems in vehicles.

Garmin’s dividend, yielding 4.3%, should be able to withstand near term pressures, as the company had over $1.2 billion in cash on hand at the end of the second quarter. The real challenge for Garmin, however, is innovation. The company appears to understand this need, spending 11% of sales on R&D in 2011. However, Garmin is expected to only add $0.01 to its EPS from 2012 to 2013, with 2012 estimated EPS of $2.89 increasing to $2.90 in 2013. The company’s biggest headwind will be mitigating the market share infringement on personal navigation devices, which is Garmin’s largest revenue generator. For the first half of 2012, Garmin earned approximately 55% of its total revenue from this group of products.

Two of the company’s key indirect competitors are the mobile phone providers, Apple Inc. (NASDAQ:AAPL) and Google (NASDAQ:GOOG), both of which offer mobile navigation programs on their mobile phones. Most smartphone makers note that one of the most used features on their devices is the navigation system. Apple’s iOS6 now offers turn-by-turn navigation that will be available on the company’s newest iPhone, while Google has offered Google Navigation for some time, and the company’s acquisition of Motorola Mobility gives it an additional advantage over Garmin.

As a result, we see better uses of capital when it comes to gaining exposure to the GPS and navigation market than investing in Garmin. It also appears that insiders fear that the company’s ability to innovate might not keep pace with the rapid adoption of smartphones worldwide.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

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!