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
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, its
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 it's 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. Here's a look at some stocks where
per SEC filings.
Insiders are snapping up a solid amount of shares in
, a multi-brand, specialty apparel retailer with a market share in women's plus-size specialty apparel. Insiders are buying into strength since shares of Charming Shoppes are up over 11% so far in 2012.
Charming Shoppes has a market cap of $631 million and an enterprise value of $614 million. This stock trades at a reasonable valuation, with a price-to-sales of 0.31 and a price-to-book of 1.47. This is barley a cash-rich company, since the total cash position on its balance sheet is $157.75 million and its total debt is $143.08 million.
A beneficial owner just
, aT $5.20 to $5.22 per share.
From a technical perspective, CHRS is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock recently triggered a big
once it moved above some near-term overhead resistance at $5 to $5.07 a share. Since triggering that breakout, the stock has run up towards its current price of just over $5.50 a share.
If you're bullish on CHRS, I would continue to look for long-biased trades as long as the stock continues to tend above those recent breakout levels, and its 50-day moving average of $4.99 a share. As long as those levels can hold, then this stock has a great chance of re-test its next significant overhead resistance levels at $6 to $6.91 a share in the very near future.
One big bet on Charming Shoppes comes from
, which increased its position in the stock by 47% in the fourth quarter, to 12.1 million shares.
Another name that insiders are loading up on is property and casualty player
, which, through its subsidiaries, is a global insurance and reinsurance firm providing property, casualty and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises on a worldwide basis. This stock is up just over 2.5% so far in 2012.
XL Group has a market cap of $6.46 billion and an enterprise value of $4.9 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 9.33. Its estimated growth rate for this year is 567.9%, and for next year it's pegged at 16%. This is a cash-rich company, since the total cash position on its balance sheet is $3.83 billion and its total debt is $2.28 billion.
The CEO just
, at $19.94 per share. The CFO also just bought 12,660 shares, or about $253,000 worth of stock, at $20.05 per share.
, XL is currently trading above its 50-day moving average and right below its 200-day moving average, which is neutral trendwise. For the past four months, this stock has found buying support at around $18.60 to $18.80 a share. Shares of XL have run into selling resistance at around $22 to $21.50 a share.
If you're bullish on XL, then I would look for long-biased trades either below $19 a share where the buyers seem to like the stock or off a near-term breakout. That near-term breakout will trigger once XL takes out $20.51 and then $21.91 a share with high-volume. Look for volume on a move above those levels that's near or well above its three-month average action of 3,836,580 shares. Target a run up toward $23 a share if that near-term breakout triggers soon.
XL is one of
as of the most recently reported period, with a 17.1 million-share stake in the stock that comprises 2.4% of Paulson & Co.'s total portfolio.
A pharmaceutical and diagnostics player whose insiders are doing some active buying is
, which is focused on developing a range of solutions, including molecular diagnostics tests, pharmaceuticals and vaccines. This stock has done absolutely nothing so far in 2012, with shares virtually flat on the year.
Opko Health has a market cap of $1.39 billion and an enterprise value of $1.33 billion. This stock trades at a lofty valuation, with a price-to-sales of 32.71 and a price-to-book of 13.65. This is a cash-rich company, since the total cash position on its balance sheet is $87.42 million and its total debt is $12.55 million.
The CEO and chairman of the board just
, at $4.72 per share.
From a technical perspective, OPK is currently trading above its 200-day moving average and right below its 50-day
, which is neutral trendwise. For the past month and change, this stock has found some buying support at around $4.70 to $4.66 a share, and it has run into selling resistance near $5.50 and above.
If you're a bullish on OPK, then I would look for long-biased trades once this stock takes out its 50-day moving average of $5.03 with high volume. Look for volume on that move that's near or well above its three-month average action of 1,414,680 shares. If we get that action soon, I would then only add to any long positions once $5.60 to $5.85 a share are taken out with big volume. Otherwise, I would simply lock in profits near those levels if the sellers continue to defend their positions.
Opko shows up in
as of the most recently reported period, with a 2 million-share position.
Insiders are buying up a decent amount of stock in
, a biopharmaceutical company developing and commercializing products targeting the extracellular matrix for the diabetes, cancer, dermatology and drug delivery markets. Insiders are loading up into strength here since this stock is u over 23% so far in 2012.
Gilead Sciences has a market cap of $33.7 billion and an enterprise value of $31.9 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 12.61 and a forward price-to-earnings of 10.27. Its estimated growth rate for this year is -1%, and for next year it's pegged at 14.1%. This is a cash-rich company, since the total cash position on its balance sheet is $9.96 billion and its total debt is $7.92 billion.
A director just
, or about $439,000 worth of stock, at $44 per share.
From a technical perspective, GILD is currently trading above its 200-day moving average and right below its 50-day moving average, which is neutral trendwise. This stock recently gapped down from over $54 to below $45 a share on monster volume. That huge gap down has done some technical damage on the chart that could take some time to fix.
If you're bullish on GILD, I would look for long-biased trades once this stock moves back above its 50-day moving average of $44.90 on high-volume. Look for volume on a move and close back above that level that's near of well above its three-month average action of 10,773,400 shares.
If we get that action soon, I would then add to any long positions once GILD trades above its gap down day high of $48 with volume. Look for some of that gap to get filled if $48 is taken out with volume. I would completely avoid any long biased traders in GILD if its recent low of $43.81 a share is taken out on high-volume.
Gilead shows up on a list of
in the most recent quarter.
Insiders are also snapping up a large amount of stock in
, a biopharmaceutical company developing therapeutics based on ribonucleic acid interface (RNAi). Insiders are buying into big time strength here since shares of Alnylam Pharmaceuticals are up over 58% so far in 2012.
Alnylam Pharmaceuticals market cap of $557 million and an enterprise value of $404 million. This stock trades at a reasonable valuation, with a price-to-sales of 6.66 and a price-to-book of 4.62. Its estimated growth rate for this year is 3.7%, and for next year it's pegged at -73.3%. This is a cash-rich company, since the total cash position on its balance sheet is $146.40 million and its total debt is zero.
A director just
, at $10.75 per share.
From a technical perspective, ALNY is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been in a monster uptrend for the past two months and change, with the stock rising from its November low of $6.50 to its current price of just above $13 a share. During that huge uptrend, this stock has been consistently making higher lows and higher highs, which is bullish price action. Now the stock is within range of triggering a near-term breakout trade.
If you're bullish ALNY, I would look for long-biased trades once this stock breaks out above some near-term overhead resistance at $12.99 to $13.25 a share with big volume. Look for volume on that move that registers near or well above its three-month average volume of 433,223 shares. At last check, ALNY has hit a high today of $13.19 and volume is just over 200,000 shares.
I also featured ALNY recently in "
To see more stocks with notable insider buying like
( GEOY), check out the
portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.
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At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.