5 Stocks With Big Insider Buying

WINDERMERE, Fla. (Stockpickr) -- 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 they only 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, it could end up going nowhere.

Related: 5 Stocks Setting Up to Break Out

At the end of the day, large institutional money managers running big mutual funds and hedge funds 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 insiders have been doing some big buying in per SEC filings.
  

Tesla Motors

One stock with some monster insider buying is Tesla Motors ( TSLA). This company designs, develops, manufactures and sells fully electric vehicles and electric vehicle powertrain components. So far in 2011 this stock has traded flat, with shares off by around 1%.

This company has a current market cap of $2.7 billion and an enterprise value of $2.8 billion. Tesla hasn't turned a profit yet and isn't expected to be profitable until 2014. Its cash-to-debt ratio is pretty much even at around $103 million. The stock trades at a price-to-sales of 19 and a price-to-book of 15.

A director just bought 637,475 shares, or $18.3 million worth of stock, at $28.76 per share. Tesla's CEO also just bought 1.4 million shares, or $40.7 million worth of stock, at $28.76 per share.

Both insider buys were related to a follow-on private placement. The company said it would use the funds for the development of its Model X crossover vehicle, which is scheduled to hit the market in 2014.

From a technical standpoint, TSLA just broke below its 50-day moving average of $27.23 a share. It now looks like TSLA wants to trade back towards some previous support zones at around $26 to $24 a share. The 200-day moving average sits at $25.45 a share, and the way the stock is trading right now, it looks like that level is going to break soon. I would look to buy this stock on some notable weakness and use a stop just below $24 in case it wants to test even longer-term support at $21 a share.

Tesla is one of the most heavily shorted stocks in the entire market. The current short interest as a percentage of the float for TSLA is an extremely large 33.8%. Keep in mi3nd that Tesla's tradable float is only 46 million shares. With this low of a float and high of a short interest, we could easily see a huge short squeeze in the future if this company can deliver strong growth.

CTC Media

If you're looking for an emerging market stock whose insiders are buying up large amounts of shares, then take a look at CTC Media ( CTCM), which operates television networks that provide entertainment programming in the Russian Federation and North America. This stock is off to a poor start in 2011, with shares off by around 15%.

CTC Media has a market cap of $3.1 billion and an enterprise value of $3 billion. The stock currently trades at a trailing price-to-earnings of 21 and a forward price-to-earnings of 13. This company is cash-rich, with around $163.66 million in cash on their balance sheet and zero debt.

A director just bought 150,600 shares, or almost $3 million worth of stock, at $19.82 to $19.86 per share.

From a technical standpoint, I would watch for a breakout trade if you see CTCM move above some past overhead resistance at around $20.50 a share and then above its 50-day moving average of $20.65 a share. If you see a big-volume move through those levels that's well above the three-month average action of 422,000 shares, then I would buy the stock. I would add to my position aggressively once it takes out the 200-day moving average of $21.65 a share with volume.

If we don't get the breakout any time soon and CTCM wants to keep pulling back, then I would look to buy off support at around $19 to $18 a share. Only buy off those levels if you do not see expanding sell volume as it hits those prices.

The major breakout level to watch for that could signal an even bigger bullish move in the cards for CTCM is above $24 to $24.70 a share. A move above those levels would put the all-time on this stock just above $30 into play.

Abraxas Petroleum

If you're looking for a small-cap energy stock with some insider buying, then check out Abraxas Petroleum ( AXAS), an independent energy company primarily engaged in the development and production of oil and gas. Insiders are clearly finding some value in this stock, which has fallen over 27% so far in 2011.

This company has a market cap of $303 million and an enterprise value of $385 million. The stock currently trades at a forward price-to-earnings of 7.87. This company is far from cash-rich with a total of $88.95 million in total debt and just $959,000 in total cash on their balance sheet.

A director just bought 59,800 shares, or $219,466 worth of stock, at $3.67 per share.

From a technical standpoint, this stock is in a clear downtrend, with shares falling from a yearly high of $6.15 in March to the current price of around $3.30 a share. The stock is also now trading below both its 50-day and 200-day moving averages, which is bearish. Some near-term support has been found at $3.12 a share, but if that doesn't hold, AXAS could easily slide to its next major support level at $2.30 a share.

This is another heavily shorted stock with notable insider buying. The current short interest as a percentage of the float for AXAS is a rather large 14.8%. The bears have also been increasing their bets from the last reporting period by 12.8%, or by about 1.3 million shares. The bears are in full control of this stock right now, but look for short-squeeze trading opportunities in the future if the chart shapes up.

MF Global

One financial service company that key insiders are buying is at MF Global ( MF), a brokerage firm offering customized solutions in the global cash and derivatives markets. It provides execution and clearing services for products in the exchange-traded and over-the-counter derivative markets, as well as for products in the cash market. Insiders could be starting to see some value here since the stock is off by around 11% so far in 2011.

MF Global has a market cap of $1.2 billion and an enterprise value of -$5.67 billion. This stocks trades at a forward price-to-earnings of 9.53. MF Global has a big cash position of $25.88 billion and a total debt position of $18.99 billion. This gives it a total net cash position of $6.89 billion.

The company's CEO and chairman of the board just bought 36,100 shares, or $247,729 worth of stock, at $6.86 per share.

From a technical standpoint, this stock is trading below both its 50-day and 200-day moving averages, which is bearish. The stock is also in a clear downtrend with shares making lower highs and lower lows for most of this year. Just recently MF found some support at $6.72 a share, but if this stock doesn't get back above the 50-day and 200-day soon, then that support isn't going to hold for much longer.

If the stock breaks below $6.72 to $6.50 a share, then I would look for a better buying opportunity at a much longer-term support zone around $5.30 to $4.88 a share.

It's worth noting that MF Global is another heavily shorted stock. The current short interest as a percentage of the float for MF stands at 12.1%. The bears are in control of MF for now, so it's better to be patient and wait for the stock to end its downtrend. Once we can get some stabilization and sideways consolidation trading action, then you can look for a short squeeze trade.

Overseas Shipholding Group

One more stock that has seen some big insider buying recently is Overseas Shipholding ( OSG), a bulk shipping company engaged in the ocean transportation of crude oil and petroleum products. This is another stock where insiders must be starting to sniff out some value since shares are down over 24% so far in 2011.

This company has a market cap of $828.37 million and an enterprise value of $2.6 billion. This company is not currently profitable, and it's loaded in debt. Total debt on its balance sheet is $2.07 billion, and its total cash position is just $277.73 million.

A director and beneficial owner just bought 43,103 shares, or $1.1 million worth of stock, at $25 per share. That same insider also recently bought 66,521 shares, or $1.7 million worth of stock, at $25.35 per share. The company's CEO has also jumped in on the buying, scooping up 3,154 shares, or $83,738 worth of stock, at $26.55 per share.

From a technical standpoint, this stock has been in a nasty downtrend all year, with shares falling from its high of $37.29 to its current price of around $27 a share. The stock is now trading below both its 50-day and 200-day moving averages, which is bearish. That said, shares of OSG recently found some longer-term support at around $25 a share. That is an area that the stock has found support at numerous times in the past three years. One could be a buyer of this stock on any weakness and simply stop out if it trades below $24.73 a share on heavy volume.

The current short interest as a percentage of the float for OSG is a rather large 25.8%. The bears continue to lean all over this stock, since they just increased their bets from the last reporting period by 17.8%, or by about 1 million shares. If OSG holds support at $25, then look for some short squeeze trades in the future.

To see more stocks with notable insider buying, check out the Stocks With Big Insider Buying 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.

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