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 insiders usually buy their own shares for one reason: They think the stock is a bargain and has tremendous upside.

>>5 Stocks Poised to Break Out

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 large 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 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 several stocks whose insiders have been doing some big buying per SEC filings.

Vical

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One stock whose insiders are doing some big buying is Vical ( VICL), which researches and develops biopharmaceutical products based on its DNA delivery technologies for the prevention and treatment of serious or life-threatening diseases. This stock is off to a poor start in 2012, with the shares off by around 14%.

Vical has a market cap of $270.28 million and an enterprise value of $217.64 million. This stock trades at price-to-sales of 8.72, and it trades at a price-to-book of 4.06. Its estimated growth rate for this year is 74.5%, and for next year it's pegged at -176.9%. This is a cash-rich company, since the total cash position on its balance sheet is $52.63 million and its total debt is zero.

A beneficial owner just bought 2.67 million shares, or $10 million worth of stock, at $3.75 per share.

From a technical standpoint, VICL is currently trading above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock recently gapped down from over $4 a share to $3.60 on monster volume. Since that monster volume gap down, the stock has been able to hold that $3.61 low and trend a bit higher back above its 200-day moving average of $3.72.

If you're bullish on VICL, I would consider getting long at current levels since the upside volume the last few days has been very strong. I would simply use a mental stop right below that recent $3.61 low, since a break of that price would have me avoiding this stock like the plague. I would only add to any long positions in VICL once it takes out its 50-day at $4.04 with volume. Look for volume that registers near or above its three-month average volume of 876,732 shares.

The only reason I lean slightly bullish on VICL after that large volume gap down is that the stock is still showing a pattern of higher lows since it bottomed in October at $2.22 a share.

Vical, which is rated C- hold by TheStreet Ratings, shows up on a list of the 10 Best-Performing Stocks Under $5 in 2011, along with Majesco ( COOL) and Adolor ( ADLR).

Glu Mobile

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Another name that insiders are jumping into here is Glu Mobile ( GLUU), which designs, markets and sells mobile games. Insiders are clearing sniffing out some deep value here since this stock is down by over 40% in the last six months.

Glu Mobile has a market cap of $192.27 million and an enterprise value of $155.32 million. This stock trades at a price-to-sales of 2.89 and it trades at a price-to-book of 3.30. Its estimated growth rate for this year is -87.5%, and for next year it's pegged at -33.3%. This is a cash-rich company, with a total cash position on its balance sheet of $37.05 million and total debt of zero.

A director just bought 68,945 shares, or around $205,000 worth of stock, at $3 per share. This same director also just bought over $1.7 million worth of stock at $2.99 to $3 per share.

From a technical standpoint, GLUU is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has started to find some buying support at around $2.89 to $2.95 in the last few months. As long as those levels hold as support then this stock could be putting in a near-term bottom and preparing to trend much higher.

If you're bullish on GLUU, then you could be a buyer once this stock closes back above its 50-day moving average of $3.20 with volume. Look for volume that's near or above its three-month average action of 1.4 million shares. If we get that move soon, then I would add to any long positions once GLUU takes out its 200-day moving average of $3.73 and some major near-term overhead resistance levels at $3.81 to $3.89 with volume.

A high-volume move above those levels will trigger a big breakout for GLUU. I would simply use a mental stop that's right below $2.89 or even down to $2.55 a share if you want to give it more room.

TheStreet Ratings rates Glu Mobile a D- sell.

Sears Holdings

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One retail department and discount operator whose insiders are buying a gigantic amount of stock in is Sears Holdings ( SHLD), the parent company of Kmart and Sears Roebuck. Insiders are buying into extreme weakness since this stock is down around 57% in the last six months.

Sears Holdings has a market cap of $3.37 billion and an enterprise value of $7.44 billion. This stocks trades at a price-to-sales of 0.08, and it trades at a price-to-book of 0.46. Its estimated growth rate for this year is -480%, and for next year it's pegged at 4.5%. This is far from a cash-rich company, since the total cash position on its balance sheet is $624 million and its total debt is a whopping $4.55 billion.

A director and beneficial owner just bought 409,200 shares, or about $12.2 million worth of stock, at $30.99 per share. This same director also just bought 4.7 million shares, or about $136.6 million worth of stock, at $29.21 per share.

From a technical standpoint, SHLD is currently trading substantially below both its 50-day and 200-day moving averages, which is bearish. This stock has been stuck in a nasty downtrend, with shares dropping from the October high of $82.74 to a recent low of $28.89 a share. Since hitting that low, this stock has started to rebound a bit, but it's still at risk of downtrending more if it can't hold that $28.89 low. The current relative strength index RSI reading for SHLD is 25.5, which demonstrates a very oversold condition.

If you're a bull on SHLD, one could be a buyer of this beaten-down stock once it triggers a breakout trade above $34.65 and then $38 a share with high volume. Look for volume that's near or above its three-month average action of 1.2 million shares. Any potential move above $38 with volume should be considered significant because that's a recent gap down day high price.

If SHLD can get back above $38, then it has the chance to start filling that gap down from $47 a share. I would simply use a mental stop that's a few percentage points below $34.65 if you get long off the breakout.

Sears, which is rated D+ sell by TheStreet Ratings, was also recently featured in " 7 Hot Stocks on Traders' Radars" and " 7 Extreme Stocks to Trade in This Volatile Market."

Synta Pharmaceuticals

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One stock in the health care complex whose insiders have snapped up a large amount of shares of is Synta Pharmaceuticals ( SNTA), a biopharmaceutical firm focused on discovering, developing, and commercializing small molecule drugs to extend and enhance the lives of patients with severe medical conditions, including cancer and chronic inflammatory diseases. Insiders are buying into strength here since this stock is up over 47% in the last three months.

Synta Pharmaceuticals has a market cap of $224.82 million and an enterprise value of $190.47 million. This stock trades at a price-to-sales of 27.36 and a price-to-book of 9.13. Its estimated growth rate for this year is -18.3%, and for next year it's pegged at 6.4%. This is a cash-rich company, with a total cash position on its balance sheet of $50.66 million and total debt of $16.8 million.

A director and beneficial owner just bought 1.1 million shares, or close to $5 million worth of stock, at $4.40 per share.

From a technical standpoint, SNTA is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock recently bounced off its 50-day at $4.21 and its now moving back above its 200-day of $4.50 a share. Shares of SNTA are also starting to enter a gap down zone between $5 and $4.26 a share.

If you're bullish SNTA, I would look to be a buyer of this stock if it can manage to close back above its 200-day moving average of $4.50 on solid volume. Look for volume that registers near or well above its three-month average action of 216,222 shares.

If we get that action, then this stock has a good chance to run back towards its nearest overhead resistance levels at $5.15 to $5.23 a share. I would then add to any long positions if those levels are taken out with volume. I would use a mental stop just below near-term support at $4.44, or the 50-day at $4.21 if you want to give it more room.

Synta is rated D- sell by TheStreet Ratings.

Comverge

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In the electronic instrument and controls complex, insiders are buying up some stock in Comverge ( COMV), a provider of intelligent energy management. This stock is off to a strong start in 2011, with shares up over 12%.

Comverge has a market cap of $35.4 million and an enterprise value of $36.4 million. This stock trades at a price-to-sales of 0.25 and a price-to-book of 1.12. Its estimated growth rate for this year is 47.2%, and for next year it's pegged at 59.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $25.5 million and its total debt is $27 million.

A beneficial owner just bought 550,100 shares, or about $707,000 worth of stock, at $1.23 to $1.40 per share.

From a technical standpoint, COMV is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock dropped from its October high of $1.98 to a recent low of $1.03 a share. Since hitting that low, the stock has rebounded sharply to its current price of $1.42 a share. As this stock has uptrended to its current price it has been making higher highs and higher lows, which is bullish price action.

If you're bullish on COMV, I would look to buy the next big breakout, which will trigger when this stock takes out $1.48 to $1.49 with volume. Look for volume that registers near or above its three-month average action of 145,410 shares. I would simply use a mental stop that's just below its 50-day moving average of $1.35 in case the breakout fails. That's also a great stop to use if you buy off weakness and anticipate the breakout.

To see more stocks with notable insider buying, including Cracker Barrel Old Country Store ( CBRL), Vitesse Semiconductor ( VTSS) and Sunrise Senior Living ( SRZ), 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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