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TheStreet Open House

5 Stocks With Big Insider Buying

Stock quotes in this article: PLCM, MCP, HLSS, HALO, IMMR


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Another stock that insiders are loading up on big here is Molycorp (MCP), a rare earth oxide producer in the Western Hemisphere. Insiders are buying this stock into some major weakness, since shares are off by over 50% so far in 2012.

Molycorp has a market cap of $1.25 billion and an enterprise value of $1.93 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 19.55. Its estimated growth rate for this year is -71.2%, and for next year it's pegged at 18.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $369.26 million and its total debt is $1.11 billion.

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A beneficial owner and director just bought 2.5 million shares, or $25 million worth of stock, at $10.00 per share. The CEO also just bought 50,000 shares, or $500,000 worth of stock, at $10.00 per share. Another beneficial owner also just bought 4.5 million shares, or $45 million worth of stock, at $10 per share.

From a technical perspective, MCP is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the past six months, with shares dropping from over $30 to a recent low of $9.40 a share. During that move, shares of MCP have consistently made lower highs and lower lows, which is bearish technical price action. That said, shares of MCP have now started to bounce off of oversold levels once its relative strength index reading dipped well below 30.

If you're in the bull camp on MCP, then I would look for long-biased trades as long as this stock holds its trend above yesterday's low of $10.05 a share with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average action of 4,383,020 shares as bullish. If MCP can maintain that trend, then look for this stock to re-test and possibly take out its next major overhead resistance levels at $12 to $13.20 a share. Any high-volume move above $14 would give MCP a chance to re-fill a previous gap back toward $16 a share.

On the flip side, I would MCP or look for short-biased trades if it fails to hold its near-term gains, and then drops back below $10.04 to $9.40 a share with heavy volume. A move below $9.40 will mean that MCP has entered new 52-week-low territory, which is bearish technical price action.

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