5 Stocks With Big Insider Buying

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.

Martin Marietta Materials

One general building materials player that insiders are in love with here is Martin Marietta Materials  (MLM), which supplies aggregates products and heavy building materials for the construction industry in the U.S. and internationally. Insiders are buying this stock into big strength, since shares have ripped higher by 25% over the last six months.

Martin Marietta Materials has a market cap of $10 billion and an enterprise value of $11.5 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 51.4 and a forward price-to-earnings of 19.6. Its estimated growth rate for this year is 43.9%, and for next year it's pegged at 41.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $56.37 million and its total debt is $1.58 billion. This stock currently sports a dividend yield of 1.1%.

A director just bought 16,150 shares, or about $2.43 million worth of stock, at $150.35 to $151.40 per share.

From a technical perspective, MLM is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently pulled back right to some near-term support at $146.33 a share and right above its 50-day moving average of $144.25 a share. Shares of MLM have now started to bounce higher off those support levels and it's beginning to move within range of triggering a near-term breakout trade.

If you're bullish on MLM, then I would look for long-biased trades as long as this stock is trending above some near-term support at $146.35 or above its 50-day at $144.25 and then once it breaks out above some near-term overhead resistance levels at $153 to its 52-week high of $155.98 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 766,578 shares. If that breakout hits soon, then MLM will set up to enter new 52-week-high territory above $155.98 a share, which is bullish technical price action. Some possible upside targets off that move are $160 to $170 a share.

American Homes 4 Rent

Another real estate investment trust player that insiders are jumping into here is American Homes 4 Rent  (AMH), which engages in the acquisition, renovation, leasing and operating single-family home rental properties in the U.S. Insiders are buying this stock into modest weakness, since shares have dropped by 3% over the last six months.

American Homes 4 Rent has a market cap of $3.5 billion and an enterprise value of $5.5 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 18.1. Its estimated growth rate for this year is 24.6%, and for next year it's pegged at 31%. This is not a cash-rich company, since the total cash position on its balance sheet is $115.69 million and its total debt is $2.16 billion. This stock currently sports a dividend yield of 1.2%.

A director just bought 249,083 shares, or about $4.15 million worth of stock, at $16.63 to $16.77 per share.

From a technical perspective, AMH is currently trending below its 200-day moving average and just above its 50-day moving average, which is neutral trendwise. This stock has been uptrending a bit for the last month, with shares moving higher from its low of $16.30 to its recent high of $16.96 a share. During that uptrend, shares of AMH have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of AMH within range of triggering a major breakout trade.

If you're in the bull camp on AMH, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $16.30 to $16.21 and then once it breaks out above some near-term overhead resistance levels at $17 to $17.60 a share with volume that hits near or above its three-month average action of 1.23 million shares. If that breakout gets underway soon, then AMH will set up to re-test or possibly take out its next major overhead resistance levels at $18.11 to its 52-week high of $18.85 a share. Any high-volume move above those levels will then give AMH a chance to tag or trend north of $20 a share.

Luminex

One health care player that insiders are active in here is Luminex  (LMNX), which develops, manufactures and sells proprietary biological testing technologies and products for the diagnostics and life sciences industries worldwide. Insiders are buying this stock into notable weakness, since shares have dropped by 9.6% over the last six months.

Luminex has a market cap of $725 million and an enterprise value of $611 million. This stock trades at a fair valuation, with a trailing price-to-earnings of 17.3 and a forward price-to-earnings of 28. Its estimated growth rate for this year is -42.4%, and for next year it's pegged at 13.2%. This is a cash-rich company, since the total cash position on its balance sheet is $94.91 million and its total debt is zero.

A director just bought 38,966 shares, or about $651,000 worth of stock, at $16.71 per share.

From a technical perspective, LMNX is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has started to bounce right off its 50-day moving average of $16.38 a share with decent upside volume flows. That bounce has now started to push shares of LMNX within range of triggering a big breakout trade.

If you're bullish on LMNX, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $16.38 a share or above some more near-term support at $16.16 a share and then once it breaks out above some near-term resistance levels at $17.75 to $18.69 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 264,341 shares. If that breakout kicks off soon, then LMNX will set up to re-test or possibly take out its next major overhead resistance levels at $20.10 to $20.89 a share, or even its 52-week high of $21.69 a share.

Insulet

Another health care player that insiders are active in here is Insulet  (PODD), which develops, manufactures and sells insulin infusion systems for people with insulin-dependent diabetes in the U.S. Insiders are buying this stock into major weakness, since shares have plunged by 35% over the last six months.

Insulet has a market cap of $1.65 billion and an enterprise value of $1.64 billion. This stock trades at a fair valuation, with a price-to-sales of 5.87 and a price-to-book of 20.38. Its estimated growth rate for this year is 57%, and for next year it's pegged at 90%. This is not a cash-rich company, since the total cash position on its balance sheet is $145.61 million and its total debt is $180.56 million.

The CEO just bought 20,000 shares, or about $558,000 worth of stock, at $27.74 to $28.08 per share.

From a technical perspective, PODD is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending over the last month, with shares moving higher from its low of $24.95 to its recent high of $29.50 a share. During that uptrend, shares of PODD have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of PODD within range of triggering a major breakout trade.

If you're bullish on PODD, then I would look for long-biased trades as long as this stock is trending above some near-term support at $27.22 and then once it breaks out above its 50-day moving average of $29.62 and then above some key overhead resistance levels at $31.55 to $32 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 829,984 shares. If that breakout triggers soon, then PODD will set up to re-test or possibly take out its next major overhead resistance levels at $34.42 to $36.30 a share, or even $40 a share.

Valeant Pharmaceuticals

One final stock with some big insider buying is healthcare player Valeant Pharmaceuticals  (VRX), which develops, manufactures and markets pharmaceuticals, over-the-counter products, and medical devices worldwide. Insiders are buying this stock massive strength, since shares have ripped higher by 62.5% over the last six months.

Valeant Pharmaceuticals has a market cap of $81.5 billion and an enterprise value of $105.9 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 81.1. This is not a cash-rich company, since the total cash position on its balance sheet is $1.89 billion and its total debt is a whopping $26.02 billion.

A director just bought 7,500 shares, or about $1.76 million worth of stock, at $234 per share. From a technical perspective, VRX 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 six months, with shares moving higher from its low of $135.48 to its recent high of $246.01 a share. During that uptrend, shares of VRX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of VRX within range of triggering a near-term breakout trade.

If you're bullish on VRX, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $230 a share or at $220 a share and then once it breaks out above its 52-week high of $246.01 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 volume of 2.22 million shares. If that breakout gets set off soon, then VRX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $255 to $260 a share, or even $265 to $270 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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