Skip to main content

Editors' pick: Originally published June 29.

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.

Stocks with notable insider activity is something that I tweet about on a regular basis. These are also the exact type of stocks that I love to trade and alert in real-time.

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.

Paratek Pharmaceuticals

Image placeholder title

One clinical stage biopharmaceutical player that insiders are active in here is Paratek Pharmaceuticals (PRTK) - Get Paratek Pharmaceuticals Inc Report , which focuses on the development and commercialization of therapeutics based upon tetracycline chemistry in the U.S. Insiders are buying this stock into big weakness, since shares have fallen by 27.2% over the last six months.

Paratek Pharmaceuticals has a market cap of $289 million and an enterprise value of $129 million. This stock trades at a reasonable valuation, with a price-to-book of 3.02. This is a cash-rich company, since the total cash position on its balance sheet is $112.26 million and its total debt is $19.59 million.

The CEO just bought 20,000 shares, or about $269,000 worth of stock at $13.45 per share. From a technical perspective, Paratek Pharmaceuticals 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 collapsing off its high of $18.92 share to its new 52-week low of $12.05 a share. During that downtrend, shares of Paratek Pharmaceuticals 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 $12.05 low, and it's beginning to move within range of triggering a near-term breakout trade.

If you're bullish on Paratek Pharmaceuticals, then I would look for long-biased trades as long as this stock is trending above its 52-week low of $12.05 a share and then once it breaks out above some near-term overhead resistance levels at $13.50 to around $14.50 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 volume of 241,215 shares. If that breakout triggers 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 $14.60 a share to its 20-day moving average of $15.31 a share, or even $16 to its 200-day moving average of $16.86 a share.

Web.com Group

TheStreet Recommends

Image placeholder title

A technology stock that insiders are loading up on here is Web.com Group (WEB) - Get Web.com Group, Inc. Report , which provides Internet services to small businesses in North America, South America and the U.K. Insiders are buying this stock into weakness, since shares have dropped by 18.1% over the last six months.

Web.com Group has a market cap of $804 million and an enterprise value of $1.5 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 9.9 and a forward price-to-earnings of 5.5. Its estimated growth rate for this year is 4.9%, and for next year it's pegged at 20.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $11.99 million and its total debt is $722.38 million.

A beneficial owner just bought 962,277 shares, or about $16.37 million worth of stock, at $16.91 per share.

From a technical perspective, Web.com Group is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending a bit over the last few weeks, with shares moving higher off its low of $16.21 a share to its recent high of $18.14 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of Web.com Group within range of triggering a near-term breakout trade.

If you're bullish on Web.com Group then I would look for long-biased trades as long as this stock is trending above some near-term support at $16.81 a share and then once it breaks out above its 50-day moving average of $17.97 a share to some more near-term resistance levels at $18.14 to $18.75 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 429,015 shares. If that breakout takes hold soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $20 to $20.50 a share.

Lands' End

Image placeholder title

Another stock that insiders are jumping into here is Lands' End (LE) - Get Lands' End, Inc. Report , which operates as a multi-channel retailer. Insiders are buying this stock into massive weakness, since shares have fallen sharply by 32.2% over the last six months.

Lands' End has a market cap of $503 million and an enterprise value of $829 million. This stock trades at a reasonable valuation, with a forward price-to-earnings of 13.6. Its estimated growth rate for this year -28.6%, 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 $169.07 million and its total debt is $498.04 million.

A beneficial just bought 124,830 shares, or about $1.96 million worth of stock, at $15.55 to $15.69 per share.

From a technical perspective, Lands' End is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has recently formed a triple bottom chart pattern, after shares found some buying interest at $15.49, $15.52 and $15.44 a share. Following that potential bottom, shares of Lands' End have now started to rip higher off those support levels and back above its 20-day moving average of $16.24 a share. That move is now quickly pushing this stock within range of triggering a big breakout trade above some key near-term overhead resistance levels.

If you're in the bull camp on Lands' End, then I would look for long-biased trades as long as this stock is trending above its 20-day moving average of $16.24 a share or above those triple bottom support levels and then once it breaks out above some near-term overhead resistance levels at $17.40 to $18.15 a share with volume that hits near or above its three-month average action of 250,969 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 its 50-day moving average of $19.28 to $21, or even $22 a share.

Cheniere Energy

Image placeholder title

One energy stock that insiders are active in here is Cheniere Energy (LNG) - Get Cheniere Energy, Inc. Report , which engages in the LNG-related business in the U.S. Insiders are buying this stock into notable strength, since shares have risen by 11.4% over the last three months.

Cheniere Energy has a market cap of $8.7 billion and an enterprise value of $25 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 47. Its estimated growth rate for this year is 71.2%, and for next year it's pegged at 162.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.10 billion and its total debt is $18.42 billion.

The CEO just bought 29,000 shares, or about $993,000 worth of stock, at $34.27 per share.

From a technical perspective, Cheniere Energy is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been consolidating and trending sideways over the last four months, with shares moving between $31.02 on the downside and $39.75 on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern could trigger a big breakout trade for shares of Cheniere Energy.

If you're bullish in Cheniere Energy, then I would look for long-biased trades as long as this stock is trending above its 20-day moving average of $34.78 a share or above more near-term support at $33.38 a share and then once it breaks out above some near-term overhead resistance levels at $37.73 to its 200-day moving average of $38.58 a share and then above more key resistance levels at $39.75 to $40 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 2.47 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 $44 to $50 a share.

Pershing Gold

Image placeholder title

My final stock with some decent insider buying is gold player Pershing Gold (PGLC) - Get Pershing Gold Corporation Report , which engages in the exploration, development and mining of gold and precious metals primarily in Nevada. Insiders are buying this stock into big strength, since shares have rallied by 23.5% over the last six months.

Pershing Gold a market cap of $113 million and an enterprise value of $95 million. This stock trades at a reasonable valuation, with a price-to-book of 2.57. Its estimated growth rate for this year is 41.1%, and for next year it's pegged at 86.8%. This is a cash-rich company, since the total cash position on its balance sheet is $14.31 million and its total debt is just $10,900.

A director just bought 140,000 shares, or about $548,000 worth of stock, at $3.92 per share.

From a technical perspective, Pershing Gold is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last four months, with shares moving higher off its low of $3.48 a share to its recent high of $4.65 a share. During that uptrend, shares of Pershing Gold have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a near-term breakout trade.

If you're bullish on Pershing Gold, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $4.08 a share or above its 200-day moving average of $3.93 a share and then once it breaks out above some near-term overhead resistance levels at $4.50 to $4.65 a share with volume that hits near or above its three-month average action of 249,932 shares. If that breakout hits soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $4.99 to $5.04, or even $5.50 to its 52-week high of $6.15 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.