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 MotorsOne 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.
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