5 Stocks With Big Insider Buying -- Should You Love Them Too?
Corporate insiders sell their own companies' stock for a number of reasons.
They might need the cash for a big personal purchase such as a new house or yacht, or they might need the cash to fund a charity. Sometimes they sell as part of a planned selling program that they have put in place for diversification purposes, which allows them to sell stock in stages instead of selling all at one price.
Other times they sell because they think their stock is overvalued and the risk/reward is no longer attractive. Some even dump their own stock because they have inside knowledge that a competitor is eating their lunch and stealing market share.
But insiders usually buy their own shares for one reason: They think the stock is a bargain and has tremendous upside.
The key word in that last statement is "think." Just because a corporate insider thinks his or her stock is going to trade higher, that doesn't mean it will play out that way. Insiders can have all the conviction in the world that their stock is a buy, but if the market doesn't agree with them, the stock could end up going nowhere. Also, I say "usually" because sometimes insiders are loaned money by the company to buy their own stock. Those loans are often sweetheart deals and shouldn't be viewed as organic insider buying.
At the end of the day, it's institutional money managers running big mutual funds and hedge funds that drive stock prices, not insiders. That said, many of these savvy stock operators will follow insider buying activity when they agree with the insider that the stock is undervalued and has upside potential. This is why it's so important to always be monitoring insider activity but twice as important to make sure the trend of the stock coincides with the insider buying.
Recently, a number of companies' corporate insiders have bought large amounts of stock. These insiders are finding some value in the market, which warrants a closer look at these stocks.
Eastman Kodak
One electronic equipment player that insiders are active in here is Eastman Kodak (KODK) - Get Report , which provides hardware, software, consumables and services to customers in various markets worldwide. Insiders are buying this stock into major weakness, since shares have traded off by 34.8% over the last six months.
Eastman Kodak has a market cap of $536 million and an enterprise value of $689 million. This stock trades at a fair valuation, with a price-to-sales of 0.28 and a price-to-book of 3.40. This is not a cash-rich company, since the total cash position on its balance sheet is $521 million and its total debt is $674 million.
A beneficial owner just bought 177,167 shares, or about $2.17 million worth of stock, at $12.23 to $12.36 per share.
From a technical perspective, Eastman Kodak is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly over the last few weeks, with shares dropping from its high of $17.31 to its new 52-week low of $10.75 a share. During that downtrend, shares of Eastman Kodak have been consistently making lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to rebound off that $10.75 low with strong upside volume flows.
If you're bullish on Eastman Kodak, then I would look for long-biased trades as long as this stock is trending above some near-term support at $12 a share or near $11 a share and then once it breaks out above Tuesday's intraday high of $13.03 a share with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average action of 202,948 shares. If that move gets underway soon, then this stock will set up to re-fill some of its previous gap-down-day zone from last week that started near $15 a share.
Ultratech
Another technology player that insider are jumping into here is Ultratech (UTEK) , which develops, manufactures and markets photolithography, laser thermal processing and inspection equipment. Insiders are buying this stock into notable weakness, since shares have dropped by 20.8% over the last six months.
Ultratech has a market cap of $426 million and an enterprise value of $173 million. This stock trades at a premium valuation, with a forward price-to-earnings of 268. Its estimated growth rate for this year is 41.8%, and for next year it's pegged 115.4%. This is a cash-rich company, since the total cash position on its balance sheet is $259.40 million and its total debt is just $6.66 million.
A beneficial owner just bought 87,935 shares, or about $1.37 million worth of stock, at $15.62 to $15.69 per share. That same beneficial owner also just bought 86,537 shares, or about $1.35 million worth of stock, at $15.39 to $15.60 per share.
From a technical perspective, Ultratech is currently trending below both its 50-day and 20-day moving averages, which is bearish. This stock has been uptrending a bit over the last few weeks, with shares moving higher from its low of $13.97 to its recent high of $16.42 a share. During that uptrend, shares of Ultratech have been making mostly higher lows and higher highs, which is bullish technical price action. This move has now pushed this stock within range of triggering a big breakout trade above some near-term overhead resistance levels.
If you're in the bull camp on Ultratech, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $15.50 or at $15 a share and then once it breaks out above some near-term overhead resistance levels at $16.46 to $17.04 a share and then above more resistance at $17.44 to its 200-day moving average of $17.62 a share with volume that hits near or above its three-month average action of 231,428 shares. If that breakout fires off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $19 to $20, or even $21 a share.
Kinder Morgan
One basic materials player that insiders are in love with here is Kinder Morgan (KMI) - Get Report , which operates as an energy infrastructure and energy company in North America. Insiders are buying this stock into large weakness, since shares have dipped sharply by 36.2% over the last six months.
Kinder Morgan has a market cap of $61.3 billion and an enterprise value of $105.7 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 52 and a forward price-to-earnings of 33. Its estimated growth rate for this year is -28%, and for next year it's pegged at 7.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $332 million and its total debt is $44.67 billion. This stock currently sports a dividend yield of 7.4%.
The CEO just bought 18,150 shares, or about $497,000 worth of stock, at $27.43 per share. The general counsel also just bought 11,000 shares, or about $301,000 worth of stock, at $27.40 per share. And a vice president also just bought 10,000 shares, or about $272,000 worth of stock, at $27.24 per share.
From a technical perspective, Kinder Morgan is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last six months, with shares moving sharply lower from over $40 a share to its recent low of $25.34 a share. During that downtrend, shares of Kinder Morgan have been making mostly lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to spike higher off some near-term support at $26.28 a share and it's now quickly moving within range of triggering a near-term breakout trade.
If you're bullish on Kinder Morgan, then I would look for long-biased trades as long as this stock is trending above some near-term support at $26.28 or above its recent low of $25.34 a share and then once it breaks out above some near-term overhead resistance at $28 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average volume of 17.24 million shares. If that breakout develops soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $29.67 to $32, or even $34 a share.
Everi Holdings
One financial player that insiders are loading up on here is Everi Holdings (EVRI) - Get Report , which provides cash access services and related equipment and services to the gaming industry. Insiders are buying this stock into notable weakness, since shares have plunged by 31.9% over the last six months.
Everi Holdings has a market cap of $329 million and an enterprise value of 1.3 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 4.9. Its estimated growth rate for this year -10.2%, and for next year it's pegged at 27.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $174.60 million and its total debt is $1.17 billion.
A beneficial owner just bought 186,957 shares, or about $815,000 worth of stock, at $4.19 to $4.77 per share.
From a technical perspective, Everi Holdings is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has just started to spike back above both its 20-day moving average of $4.89 and its 50-day moving average of $4.99 a share with decent upside volume flows. That spike is now starting to push shares of Everi Holdings within range of triggering a big breakout trade above some key near-term overhead resistance levels.
If you're bullish on Everi Holdings, then I would look for long-biased trades as long as this stock is trending above some near-term support at around $4.50 a share and then once it breaks out above some near-term overhead resistance at $5.35 to $5.41 a share and then above more key resistance at $5.62 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 547,560 shares. If that breakout kicks off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $6.25 to its 200-day moving average of $6.66 a share.
Aclaris Therapeutics
One final stock with some large insider buying is clinical-stage pharmaceutical player Aclaris Therapeutics (ACRS) - Get Report , which focuses on identifying, developing, and commercializing topical drugs to address various unmet needs in dermatology. Insiders are buying this stock into major strength, since shares have jumped higher by 36.9% over the last six months.
Aclaris Therapeutics has a market cap of $304 million and an enterprise value of $29 million. This is a cash-rich company, since the total cash position on its balance sheet is $9.85 million and its total debt is zero.
A beneficial owner just bought 244,200 shares, or about $3.41 million worth of stock, at $14 per share. From a technical perspective, Aclaris Therapeutics is currently trending above its 20-day moving average, which is bullish. his stock has been consolidating and trending sideways over the last few weeks, with shares moving between $12.99 on the downside and just over $16 a share on the upside. Shares of Aclaris Therapeutics are now starting to trend higher off some near-term support at $14 a share and it's beginning to move within range of triggering a big breakout trade above the upper-end of its recent sideways trending chart pattern.
If you're bullish on Aclaris Therapeutics, then I would look for long-biased trades as long as this stock is trending above some near-term support at $14 or at $13 a share and then once it breaks out above some near-term overhead resistance levels at $16 to its all-time high of $17.24 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 157,850 shares. If that breakout gets started soon, then this stock will set up to enter new all-time-high territory above $17.24, which is bullish technical price action. Some possible upside targets off that move are $20 to $22, or even $23 to $25 a share.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.