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
per SEC filings.
One stock that insiders are doing some notable buying in is
, which operates three Russian television networks. The company also operates Channel 31, a television network in Kazakhstan, and a television channel in Moldova, each offering entertainment programming. It looks like insiders are finding some deep value here since this stock has been destroyed, dropping over 60% so far in 2011.
CTCM Media has a market cap of $1.45 billion and an enterprise value of $1.32 billion. This stock trades at an outrageously cheap valuation; its trailing price-to-earnings is 9.55, and its forward price-to-earnings is just 7.69. CTCM Media's estimated growth rate for this year is 16.1%, and for next year it's pegged at 11.1%. This is a cash-rich company, since the total cash position on its balance sheet is $132.16 million and its total debt is zero.
This stock also has a hefty dividend yield of 13.7%. One of the
, it shows up on a recent list of
A director just
. This same director also bought close to $3 million in stock back in early June at $19.82 to $19.86 per share.
From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending hard for the last couple of months, since shares have dropped from its August high of $21.51 to a recent low of $8.04 a share. During that downtrend, the stock has been consistently making lower lows and lower highs. Every time CTCM has traded up towards its 50-day moving average, it has also failed and dropped lower.
If you're bullish on this stock, I would look at two levels for potential long entries. The first would be to potentially buy the stock if it re-tests that $8.04 October low. If the stock trades back down to that level, and then holds, it could be a good place to be a buyer. The second potential entry is to buy some shares CTCM once it finally breaks back above its 50-day moving average of $10.67 with high-volume. Look for volume that's tracking in close to or above its three-month average action of 618,908 shares. I would use a tight mental stop that's a few percentage points below your entry on either strategy.
Another stock that insiders are loading up on is
, which owns and operates a retail and wholesale propane supply, marketing and distribution business. Insiders probably think this stock is fairly undervalued, with shares off by over 35% so far in 2011.
Inergy has a market cap of $2.86 billion and an enterprise value of $4.70 billion. This stock trades at a premium valuation, since its trailing price-to-earnings is 159.93 and its forward price-to-earnings is 23.52. Their estimated growth rate for this year is 466.7% and for next year it's pegged at 20%. This is far from a cash-rich company, with a total cash position on its balance sheet of $11.5 million and total debt of $1.85 billion. This stock currently has a sizeable dividend yield at 11.8% and is one of the
The president just
. The CEO also just
, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock put in a near-term double top at around $28 a share and subsequently plunged to a recent low of $23.07. There's also some previous support on this stock at $22.14, which so far has held on this recent dive.
If you're bullish on this name, you could be a buyer near current levels at $24 a share with a tight mental stop just below $23.07 or $22.14 a share. If the stock has put in a bottom near-term, then the recent selloff could be a buying opportunity. You could also buy off of strength and get long once the stock trades back above its 50-day moving average of $25.45 on high volume. Look for volume that's close to or well above its three-month average action of 656, 972 shares.
Green Mountain Coffee Roasters
A consumer non-cyclical player whose insiders are snapping up a decent amount of stock in is
Green Mountain Coffee Roasters
, which is engaged in the specialty coffee and coffee maker businesses. The company operates in two business segments: the specialty coffee business unit and the Keurig business unit. Insiders are taking advantage of this stocks massive dip in the last three months, since shares have dropped over 40%.
Green Mountain Coffee Roasters has a market cap of $7.79 billion and an enterprise value of $8.37 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 38.44 and a forward price-to-earnings of just 13.83. Its estimated growth rate for this year is 57.3%, and for next year it's pegged at 41.1%. This is far from a cash-rich company, since the total cash position on its balance sheet is just $13.2 million and its total debt is high at $592.91 million.
A director just
. Two other directors also recently bought around $100,000 worth of stock, at $42.17 to $43.36.
From a technical standpoint, this stock is currently trading substantially below both its 50-day and 200-day moving averages, which is bearish. This stock absolutely crashed from its September high of $115.98 to a recent low of $34.06 a share. Since that crash, the stock has rebounded sharply on heavy volume to its current price which sits at around $50 a share. The stock has also started to form a sideways trading pattern in the last couple of weeks between $48.33 and $55 a share.
If you're bullish on this stock, I would look buy off any weakness as long as that near-term range low of $48.33 is not violated. I would then add to any long position once $55.18 is taken out to the upside with volume. Look for volume on a breakout over $55.18 that's tracking in close to or above its three-month average action of about 7.7 million shares. Keep in mind that if we get high-volume move over $55.18 then look for that gap down from $72.27 to start getting filled.
Green Mountain is a top holding in both
. I featured it earlier this month in a list of
A stock in the biotechnology and drugs complex whose insiders have bought up a lot of shares is
, which is engaged in the development and commercialization of recombinant human enzymes that either transiently modify tissue under the skin to facilitate injection of other therapies or correct diseased tissue structures for clinical benefit. This stock hasn't done much in 2011, with shares up just 3%.
Halozyme Therapeutics has a market cap of $842.38 million and an enterprise value of $776.05 million. Its estimated growth rate for this year is 71.4%, and for next year it's pegged at -187.5%. This is a cash-rich company, since its total cash position is $66.33 million and its total debt is zero.
A beneficial owner and director just
. This same director also bought around $5.9 million worth of stock in early August between $5.88 and $6.13 per share.
From a technical standpoint, this stock is currently trading above both its 50-day and 200-day moving averages, which I bullish. This stock recently gapped up on monster volume from around $6 to over $7.50 a share. After that gap up, the stock has started to trade inside of a sideways trading pattern between $9 and $7.83 a share.
If you're bullish on this stock, I would look to buy some shares near the bottom of that range at let's say around $8 a share. I would use a tight mental stop just below the 50-day moving average of $7.29. I would then look to add aggressively to any long position if this stock breaks out above $9.04 and $9.11 a share on high volume. Look for volume that's tracking in close to or above its three-month average action of 659,586 shares.
In the medical equipment and supplies complex, insiders have been buying up shares of
, a diagnostic testing and genetics analysis company. Insiders are clearly sniffing out some deep value here since this stock is down by over 50% so far in 2011.
Sequenom has a market cap of $411.27 million and an enterprise value of $322.23 million. The company's estimated growth rate for this year is 22%, and for next year it's pegged at 2.8%. This is a cash-rich company, with a total cash position on its balance sheet of $101.18 million and total debt of just $12.13 million.
The CEO just
. Two directors and an officer also just bought around $155,000 worth of stock, at $4.10 to $4.24 per share.
From a technical standpoint, this stock is currently trading well below both its 50-day and 200-day moving averages, which is bearish. This stock has been stuck in a nasty downtrend since July when it topped out at around $8 a share. Since that top, the stock has done nothing but consistently make higher lows and lower lows, which is very bearish price action. As I write this, the stock is printing a new
at $3.82 a share.
If you're bullish on this stock, you really shouldn't be based on the price action. That said, the stock is starting to get close to being oversold as measured by the relative strength index (RSI). In the past, SQNM has bounced when it trades well below 30 on the RSI, and its current reading is 34.60.
There are also some previous support zones on SQNM from back in 2009 at around $3.35 to $2.55 a share. We could test those levels if the selling doesn't abate soon. Look for a change in trend and a large upside volume day to signal that this stock is ready to bounce higher. I would look for volume that's tracking in well above its three-month average action of around 2.2 million shares.
To see more stocks with notable insider buying, including
, 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.