5 Stocks With Big Insider Buying: Seattle Genetics and More

DELAFIELD, Wis. (Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.

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.

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. Here's a look five stocks whose insiders have been doing some big buying per SEC filings.


C&J Energy Services

One oil and gas equipment and services player that insiders are active in here is C&J Energy Services ( (CJES) ), which provides hydraulic fracturing, coiled tubing, wireline, and other complementary services to oil and gas exploration and production companies in the U.S. Insiders are buying this stock into major weakness, since shares have dropped sharply lower over the last three months by 34%.

C&J Energy Services has a market cap of $1 billion and an enterprise value of $1.3 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 19.8 and a forward price-to-earnings of 9.9. Its estimated growth rate for this year is 10.7%, and for next year it's pegged at 42.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $20.30 million and its total debt is $345.85 million.

A director just bought 340,887 shares, or about $6.38 million worth of stock, at $18.69 per share.

From a technical perspective, CJES is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has recently started to rebound higher off its new 52-week low of $16.66 a share. That rebound is now starting to push shares of CJES within range of triggering a near-term breakout trade.

If you're bullish on CJES, then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $16.66 and then once it breaks out above some key near-term overhead resistance at $19.86 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 1.41 million shares. If that breakout hits soon, then CJES will set up to re-test or possibly take out its next major overhead resistance levels $21.66 to its 50-day moving average of $23.63 a share.

Seattle Genetics

Another biotechnology player that insiders are loading up on here is Seattle Genetics (SGEN), which develops and commercializes antibody-based therapies for the treatment of cancer. Insiders are buying this stock into modest weakness, since shares are down by just 4.4% so far in 2014.

Seattle Genetics has a market cap of $4.6 billion and an enterprise value of $4.3 billion. This stock trades at a premium valuation, with a price-to-sales of 16.7 and a price-to-book of 20.7. Its estimated growth rate for this year is -29.4%, and for next year it's pegged at 16.7%. This is a cash-rich company, since the total cash position on its balance sheet is $339.56 million and its total debt is zero.

A director just bought 1,653,925 shares, or about $57.15 million worth of stock, at $33.71 to $36.57 per share.

From a technical perspective, SGEN 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 uptrending over the last few weeks, with shares moving higher from its low of $32.63 to its intraday high of $38.70 a share. During that uptrend, shares of SGEN have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SGEN within range of triggering a near-term breakout trade.

If you're in the bull camp on SGEN, then I would look for long-biased trades as long as this stock is trending above some near-term support just below $36 a share and then once it breaks out above some near-term overhead resistance levels at $39.20 a share to its 200-day moving average of $40.33 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 1.09 million shares. If that breakout triggers soon, then SGEN will set up to re-test or possibly take out its next major overhead resistance levels at $42.18 to $42.39 a share, or even $44.95 a share.


Web.com

One technology player that insiders are snapping up a lot of stock in here is Web.com ( (WWWW) ), which provides Internet services to small businesses in North America, South America, and the United Kingdom. Insiders are buying this stock into major weakness, since shares plunged lower by 49% so far in 2014.

Web.com has a market cap of $820 million and an enterprise value of $1.3 billion. This stock trades at a fair valuation, with a forward price-to-earnings of 6.5. Its estimated growth rate for this year is 13.1%, and for next year it's pegged at 1.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $15.90 million and its total debt is $520.83 million.

A beneficial owner just bought 1,440,000 shares, or about $22.59 million worth of stock, at $15.69 per share.

From a technical perspective, WWWW is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down sharply from over $20 a share to $14.71 a share with heavy downside volume. Following that move, shares of WWWW have started to rebound off its new 52-week low of $14.71 share to its recent high of $16.23 a share. That move has now pushed shares of WWWW within range of triggering a major breakout trade.

If you're bullish on WWWW, then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $14.71 and then once it breaks out above some key near-term overhead resistance levels at $16.23 a share to its gap-down-day high of $16.35 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average volume of 756,302 shares. If that breakout develops soon, then WWWW will set up to re-fill some of its previous gap-down-day zone from earlier this month that started just above $20 a share.


Chesapeake Energy

One energy player that insiders are jumping into big here is Chesapeake Energy ( (CHK) ), which is engaged in the acquisition, exploration, and development of properties for the production of natural gas, oil, and natural gas liquids from underground reservoirs in the U.S. Insiders are buying this stock into notable weakness, since shares have dropped sharply by 24% over the last six months.

Chesapeake Energy has a market cap of $14.8 billion and an enterprise value of $27.8 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 28 and a forward price-to-earnings of 13.4. Its estimated growth rate for this year is 10.7%, and for next year it's pegged at 1.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $90 million and its total debt is a whopping $11.67 billion. This stock currently sports a dividend yield of 1.5%.

A director just bought 500,000 shares, or about $11.66 million worth of stock, at $23.32 per share.

From a technical perspective, CHK is currently trending just above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been uptrending very strong for the last month, with shares soaring high from its low of $16.69 to its recent high of $24.22 a share. During that uptrend, shares of CHK have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CHK within range of triggering a near-term breakout trade.

If you're bullish on CHK, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $20.95 or at $20.35 and then once it breaks out above some key near-term overhead resistance levels at $24.22 to its 200-day moving average of $25.19 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 10.69 million shares. If that breakout starts soon, then CHK will set up to re-test or possibly take out its next major overhead resistance levels at $27.12 to $29 a share, or even its 52-week high of $29.92 a share.

United States Steel

One final stock with some interesting insider buying is United States Steel ( (X) ), which produces and sells flat-rolled and tubular steel products in North America and Europe. Insiders are buying this stock into major strength, since shares are up sharply by 38% over the last six months.

United States Steel has a market cap of $5.1 billion and an enterprise value of $7.3 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 53 and a forward price-to-earnings of 9.9. Its estimated growth rate for this year is 412.6%, and for next year it's pegged at 3.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.26 billion and its total debt is $3.50 billion. This stock currently sports a dividend yield of 0.50%.

The CEO just bought 28,362 shares, or about $999,000 worth of stock, at $35.21 to $35.25 per share. The CFO also just bought 26,489 shares, or about $994,000 worth of stock, at $37.36 to $37.75 per share. From a technical perspective, X is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has recently pulled back from its high of $42.19 to its low of $34.58 a share. Shares of X are now starting to bounce modestly higher off that $34.58 low and it's beginning to move within range of triggering a near-term breakout trade above some key overhead resistance levels.

If you're bullish on X, then I would look for long-biased trades as long as this stock is trending above some key near-term support at $34.58 or above more support around $32 and then once it breaks out above its 50-day moving average of $37.90 a share to some more near-term overhead resistance at $38.04 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 8.31 million shares. If that breakout materializes soon, then X will set up to re-test or possibly take out its next major overhead resistance levels at $42.19 to $44 a share.

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

-- Written by Roberto Pedone in Delafield, Wis.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com.

You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

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