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We are long-term investors and we do not like stocks with sky-high P/E ratios. These stocks usually have high momentum and attract short-term speculators but historically high growth stocks underperformed value stocks by 4-5 percentage points annually. That's why one of the adjustments made to the CAPM model is the value effect. The high multiples usually indicate that the market already recognized the high growth potential of these stocks and a result these stocks trade at a premium. These stocks are expected to grow at high rates and insiders are generally the first ones to recognize whether these expectations are achievable or not. When they think the risks are too high, the first thing they do is to get rid of their shares.

Below we compiled a list of stocks with high P/E ratios that insiders are selling. All companies have at least $2 billion market cap, P/E ratios of over 100, and forward P/E ratios of more than 50. These companies were also sold by at least two insiders over the past month.

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Ticker	Company	P/E	Forward P/E	Insiders
CRM	Salesforce.com	6190	76.89	2
CPHD	Cepheid	1069.25	76.38	7
QLIK	Qlik Technologies, Inc.	418	68.05	4
FIO	Fusion-io, Inc.	137.76	66.91	8
ATHN	Athenahealth, Inc.	111.51	66.45	5
RAX	Rackspace Hosting, Inc.	104.34	60.54	5
EQR	Equity Residential	743.75	55.61	4

Among these seven stocks, CRM, QLIK, ATHN and RAX were sold by insiders under the 10b5-1 plans. A recent academic study has shown that stocks sold under 10b5-1 plans underperformed the market by 70 basis points per month on the average, while other insider sales had outperformed the market historically. We generally do not recommend shorting individual stocks because sometimes these stocks might be taken over at significant premiums. However investors can short a diversified portfolio of these stocks. Diversification reduces the risk of catastrophic losses for short-sellers.

Qlik Technologies: QLIK was sold by four insiders over the past month. On January 27, director Alexander Ott sold 37,900 shares of QLIK at $27.7701 per share. Ott also sold 20,000 shares at $24.9292 per share on January 17. Two other directors, Paul Wahl and Lars Bjork, also sold 10,000 shares and 40,000 shares, respectively, at about $23.5 per share in January. Leslie Bonney, Chief Operating Officer at Qlik, also sold 25,000 shares at $25.6459 on January 18. QLIK is now trading at $29.26, even higher than the prices at which the insiders purchased. We do not like QLIK. I! ts opera ting cash flow is weak and deteriorating. It also has an insanely high P/E ratio of 418 and a forward P/E ratio of 68.05. Moreover, its PEG ratio, P/B ratio and P/FCF ratio are also relatively high. At the end of the third quarter, there were 11 hedge funds with QLIK positions. There were also eight hedge funds that sold out their QLIK stakes in the third quarter. Steven Cohen's SAC Capital Advisors reduced its QLIK stake by 96% over the third quarter.

Rackspace Hosting: RAX was also sold by five insiders during the past month. On February 6, director James Bishkin sold 4,600 shares of RAX at $48.2728 per share. Bishkin also sold another 2,500 shares at $46.0088 per share on February 2. Another director, Lew Moorman, also sold 74,750 shares of RAX at $47.4273 per share on February 3 and another 2,250 shares at $44.084 on February 1. Moorman also sold another 74,750 shares at $41.7193 per share earlier on January 5. Two SVPs, Patrick Matthews and Wayne Philip Robers, also sold 5,000 shares at $43.9981 and 4,000 shares at $44.0013, respectively, at the beginning of February. Now RAX is trading at $49.04 per share. It also has an extremely high P/E ratio of 104.34 and a forward P/E ratio of 60.54. We do not like RAX. Similar to QLIK, the other multiples of RAX are also relatively high. For example, its P/B ratio is 11.68 and its P/FCF ratio is 102.59. Additionally, RAX is expected to grow at 30% on average in the next five years. We think it is quite hard for RAX to beat such high expectations. Therefore, we think contrarian investors should avoid investing in RAX. There were also a few hedge funds sold out their RAX stakes in the third quarter. For example, Israel Englander and Cliff Asness were no longer bullish about RAX.

There were also insider sales in Cepheid, Fusion-io and Equity Residential. But these three stocks were not sold under 10b5-1 plans. Hence, the insider sales in these three stocks are less informative. On the other hand, Salesforce.com and Athenahealth were also sold under! 10b5-1 plans. However, the insider sales of these two stocks were relatively small. Therefore, we do not think the insider sales at CRM and ATHN deserve a closer look at this moment.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.