5 Stocks Insiders Love Right Now

 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 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.

Omega Healthcare Investors

One real estate investment player that insiders are loading up on here is Omega Healthcare Investors  (OHI), which invests primarily in long-term health care facilities in order to create its portfolio. Insiders are buying this stock into notable weakness, since shares have dropped by 12.1% over the last three months.

Omega Healthcare Investors has a market cap of $6.5 billion and an enterprise value of $8.5 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 20.5 and a forward price-to-earnings of 11.2. Its estimated growth rate for this year is 4.6%, and for next year it's pegged at 6.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $700.14 million and its total debt is $2.63 billion. This stock currently sports a dividend yield of 2%.

A director just bought 100,000 shares, or about $3.59 million worth of stock, at $35.99 per share.

From a technical perspective, OHI is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last month and change, with shares moving lower from its high of $41.80 to its recent low of $34.30 a share. During that downtrend, shares of OHI have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of OHI have now started to bounce off that $ 34.30 low and it's beginning to move within range of triggering a near-term breakout trade.

If you're bullish on OHI, then I would look for long-biased trades as long as this stock is trending above that recent low of $34.30 and then once it breaks out above some near-term overhead resistance levels $35 to $36.44 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 1.90 million shares. If that breakout gets set off soon, then OHI will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $37.73 to its 50-day moving average of $38.45 a share, or even $39 to $40 a share.

Qualys

Another application software player that insiders are jumping into large here is Qualys  (QLYS), which provides cloud security and compliance solutions in the U.S. and internationally. Insiders are buying this stock into notable weakness, since shares have trended lower by 18.4% over the last three months.

Qualys has a market cap of $1.2 billion and an enterprise value of $1.1 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 46.8 and a forward price-to-earnings of 54.9. Its estimated growth rate for this year is 15.2%, and for next year it's pegged at 30.2%. This is a cash-rich company, since the total cash position on its balance sheet is $142.95 million and its total debt is zero.

A director just bought 50,000 shares, or about $1.87 million worth of stock, at $37.20 to $37.90 per share.

From a technical perspective, QLYS is currently trending above its 200-day moving average and well below its 50-day moving average, which is neutral trendwise. This stock recently gapped down sharply lower from over $55 to under $37 a share with heavy downside volume. Following that move, shares of QLYS have started to trend sideways and stabilize a bit right above or around its 200-day moving average of $36.59 a share. Shares of QLYS are now starting to spike higher and move within range of triggering a near-term breakout trade.

If you're in the bull camp on QLYS, then I would look for long-biased trades as long as this stock is trending above its recent low of $36.51 a share and then once it breaks out above some near-term overhead resistance levels at $38.36 to its gap-down-day high of $42 a share with volume that hits near or above its three-month average action of 666,812 shares. If that breakout triggers soon, then QLYS will set up to re-fill some of its previous gap-down-day zone from May that started at around $55.50 a share.

Theravance

One royalty management player that insiders are active in here is Theravance  (THRX), which is focused on developing respiratory products. Insiders are buying this stock into decent strength, since shares have jumped higher by 14.9% over the last three months.

Theravance has a market cap of $1.8 billion and an enterprise value of $2.3 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 35.4. Its estimated growth rate for this year is 90%, and for next year it's pegged at 400%. This is not a cash-rich company, since the total cash position on its balance sheet is $255.07 million and its total debt is $732.06 million. This stock currently sports a dividend yield of 6.1%.

A beneficial owner just bought 85,579 shares, or about $1.36 million worth of stock, at $16 per share.

From a technical perspective, THRX is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last month and change, with shares moving lower from its high of $18.61 a share to its recent low of $14.88 a share. During that downtrend, shares of THRX have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of THRX are still holding above its recent double bottom support levels at $15.01 to $14.88 a share.

If you're bullish on THRX, then I would look for long-biased trades as long as this stock is trending above those double bottom support levels and then once it breaks out above some near-term resistance levels at $16.43 to its 50-day moving average of $17.19 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 888,307 shares. If that breakout develops soon, then THRX will set up to re-test or possibly take out its next major overhead resistance levels at $18 to $18.61 a share, or even $20 to $20.90 a share.

Covanta

One waste and energy services player that insiders are in love with here is Covanta  (CVA), which owns and operates infrastructure for the conversion of waste to energy, as well as engages in other waste disposal and renewable energy production businesses. Insiders are buying this stock into slight weakness, since shares have moved lower by 7.6% over the last six months.

Covanta has a market cap of $2.9 billion and an enterprise value of $5 billion. This stock trades at a premium valuation, with a forward price-to-earnings of 44.3. Its estimated growth rate for this year is -7.7%, and for next year it's pegged at 36.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $67 million and its total debt is $2.28 billion. This stock currently sports a dividend yield of 4.8%.

The CEO just bought 25,000 shares, or about $525,000 worth of stock, at $21 per share.

From a technical perspective, CVA is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has just started to trend back above both of those key moving averages with decent upside volume flows. That move has now pushed shares of CVA within range of triggering a big breakout trade above some key near-term overhead resistance levels.

If you're bullish on CVA, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $21 to $20 a share and then once it breaks out above some near-term overhead resistance levels at $21.95 to $22.50 a share and then above $22.77 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 806,716 shares. If that breakout materializes soon, then CVA will set up to re-test or possibly take out its next major overhead resistance levels at $23.50 to $24.77 a share, or even its 52-week high of $25.35 a share.

Seattle Genetics

One final stock with some huge insider buying activity is biotechnology player Seattle Genetics  (SGEN), which develops and commercializes antibody-based therapies for the treatment of cancer. Insiders are buying this stock into massive strength, since shares have soared higher by 28.5% over the last three months.

Seattle Genetics has a market cap of $5 billion and an enterprise value of $4.6 billion. This stock trades at a premium valuation, with a price-to-sales of 16.51 and a price-to-book of 23.70. Its estimated growth rate for this year is -24.2%, and for next year it's pegged at 48.1%. This is a cash-rich company, since the total cash position on its balance sheet is $296.01 million and its total debt is zero.

A beneficial owner just bought 1,032,664 shares, or about $36.72 million worth of stock, at $33.99 to $37.07 per share. From a technical perspective, SGEN is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong over the last month, with shares moving higher from its low of $32.68 to its recent high of $42.05 a share. During that uptrend, shares of SGEN have been making mostly higher lows and higher highs, which is bullish technical price action. This stock also broke out recently above some key near-term overhead resistance levels at $38.29 to $38.52 a share and then over $39.97 a share. That move is now starting to push shares of SGEN within range of triggering another big breakout trade.

If you're bullish on SGEN, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $39 or above $38 a share and then once it breaks out above some key overhead resistance levels at $41 to $42.05 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 1.19 million shares. If that breakout kicks off soon, then SGEN will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $44.95 a share to $50 a share, or even $55 a share.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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