5 Stocks Insiders Can't Stop Buying: Titan International and More

DELAFIELD, Wis. (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.

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 matches up 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.

Titan International

One industrial goods player that insiders are jumping into here is Titan International (TWI) , which manufactures and sells wheels, tires, and undercarriage systems and components for off-highway vehicles used in the agricultural, earthmoving/construction, and consumer markets in the U.S. and internationally. Insiders are buying this stock into major weakness, since shares have plunged by 40% so far in 2014.

Titan International has a market cap of $577 million and an enterprise value of $891 million. This stock trades at a premium valuation, with a forward price-to-earnings of 538. Its estimated growth rate for this year is -119.20%, and for next year it's pegged at 113.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $180.27 million and its total debt is $526.04 million.

The CEO just bought 81,892 shares, or about $811,000 worth of stock, at $9.91 per share.

From a technical perspective, TWI is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last two months, with shares moving higher from its low of $9.14 to its recent high of $10.99 a share. During that uptrend, shares of TWI have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of TWI within range of triggering a big breakout trade.

If you're bullish on TWI, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $10 or at $9.39 to $9.14 a share and then once it breaks out above some key near-term overhead resistance at $10.99 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 696,931 shares. If that breakout hits soon, then TWI will set up to re-test or possibly take out its next major overhead resistance levels at $12.50 to $13 a share, or even $14 a share.

POZEN

Another pharmaceutical player that insiders are active in here is POZEN (POZN) , which develops products for the treatment of acute and chronic pain, and pain related conditions in the U.S. and internationally. Insiders are buying this stock into some strength, since shares are up by 14% so far in 2014.

POZEN has a market cap of $294 million and an enterprise value of $247 million. This stock trades at a fair valuation, with a trailing price-to-earnings of 27.9 and a forward price-to-earnings of 9.2. Its estimated growth rate for this year is 189.1%, and for next year it's pegged at 102%. This is a cash-rich company, since the total cash position on its balance sheet is $38.39 million and its total debt is zero.

A beneficial owner just bought 500,000 shares, or $3.75 million worth of stock, at $7.50 per share.

From a technical perspective, POZN is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last few weeks, with shares moving higher from its low of $7.07 to its recent high of $9.25 a share. During that uptrend, shares of POZN have been making mostly higher lows and higher highs, which is bullish technical price action. That trend has also recently pushed shares of POZN back above both its 50-day and 200-day moving averages. That move has now pushed shares of POZN within range of triggering a big breakout trade above some key near-term overhead resistance levels.

If you're in the bull camp on POZN, then I would look for long-biased trades as long as this stock is trending above its 50-day at $8.63 or above its 200-day at $8.39 and then once it breaks out above some key near-term overhead resistance levels at $9.25 to $9.71 a share and then above its 52-week high at $9.90 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 356,375 shares. If that breakout develops soon, then POZN will set up to enter new 52-week-high territory above $9.90 a share, which is bullish technical price action.

Diamond Offshore Drilling

One basic materials player that insiders are loading up on here is Diamond Offshore Drilling (DO) , which provides contract drilling services to the energy industry worldwide. Insiders are buying this stock into massive weakness, since shares have dropped sharply by 42% so far in 2014.

Diamond Offshore Drilling has a market cap of $4.4 billion and an enterprise value of $5.3 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 11.8 and a forward price-to-earnings of 10.4. Its estimated growth rate for this year is -34.7%, and for next year it's pegged at 1%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.07 billion and its total debt is $2.24 billion. This stock currently sports a dividend yield of 1.7%.

A beneficial owner just bought 410,395 shares, or $12.07 million worth of stock, at $29.43 to $29.79 per share.

From a technical perspective, DO is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last five months, with shares falling sharply from its high of $48.42 to its new 52-week low of $29 a share. During that downtrend, shares of DO have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of DO have now started to bounce off that $29 low and it's started to break out above some near-term overhead resistance at $31.93 a share.

If you're bullish on DO, then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $29 a share and then once it breaks out above Tuesday's intraday high of $33.27 a share to its 50-day moving average of $35.01 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 2.16 million shares. If that breakout materializes soon, then DO will set up to re-test or possibly take out its next major overhead resistance levels at 37.50 to $39.80 a share, or even its 200-day moving average of $42.54 a share.

Hawaiian Telcom HoldCo

One technology player that insiders are in love with here is Hawaiian Telcom HoldCo (HCOM) , which provides communications services and products in Hawaii. Insiders are buying this stock into weakness, since shares have dropped notably by 10.4% so far in 2014.

Hawaiian Telcom HoldCo has a market cap of $280 million and an enterprise value of $539 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 33.7 and a forward price-to-earnings of 36. Its estimated growth rate for this year is -26.3%, and for next year it's pegged at 4.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $31.69 million and its total debt is $292.98 million.

A beneficial owner just bought 56,366 shares, or about $1.46 million worth of stock, at $26.05 per share.

From a technical perspective, HCOM is currently trending just below both its 50-day and 200-day moving averages, which is bearish. This stock has been consolidating and trending sideways for the last month and change, with shares moving between $25.78 on the downside and $27.72 on the upside. Shares of HCOM are now starting to spike higher off that $25.78 low and it's starting to move within range of triggering a big breakout trade above the upper-end of its recent sideways trending chart pattern.

If you're bullish on HCOM, then I would look for long-biased trades as long as this stock is trending above some key near-term support at $25.78 a share and then once it breaks out above some key near-term overhead resistance levels at its 50-day of $26.58 and its 200-day of $27.44 a share and then above more resistance at $27.72 to $28.20 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 action of 36,956 shares. If that breakout gets started soon, then HCOM will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $31.50 a share.

Glu Mobile

One final stock with some big insider buying is Glu Mobile (GLUU) , which develops and publishes a portfolio of action/adventure and casual games for the smartphones and tablet devices users. Insiders are buying this stock into notable weakness, since shares have dropped sharply over the last three months by 24%.

Glu Mobile has a market cap of $427 million and an enterprise value of $361 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 111 and a forward price-to-earnings of 18. Its estimated growth rate for this year is 400%, and for next year it's pegged at -8.3%. This is a cash-rich company, since the total cash position on its balance sheet is $54.27 million and its total debt is zero.

A director just bought 274,050 shares, or about $1 million worth of stock, at $3.52 to $3.70 per share. From a technical perspective, GLUU 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 from its low of $3.35 to its recent high of $4.03 a share. During that uptrend, shares of GLUU have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of GLUU within range of triggering a near-term breakout trade above some key overhead resistance levels.

If you're bullish on GLUU, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $3.50 or above its 52-week low of $3.35 a share and then once it breaks out above some near-term overhead resistance levels at $4.03 to its 50-day moving average of $4.12 a share with high volume. Look for a sustained move or close above the levels with volume that registers near or above its three-month average volume of 4.58 million shares. If that breakout begins soon, then GLUU will set up to re-fill its previous gap-down-day zone from October that started at $4.70 a share. Any high-volume move above $4.70 will then give GLUU a chance to tag $5.30 to $5.50 a share.

-- 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.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes, Investor's Business Daily and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation. Follow Jonas on Twitter @JonasElmerraji.

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