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.

NuVasive

One medical device player that insiders are active in here is NuVasive  (NUVA), which develops and markets minimally-disruptive surgical products and procedurally-integrated solutions for the spine. Insiders are buying this stock into notable strength, since shares have spiked to the upside by 10.7% over the last six months.

NuVasive has a market cap of $2.4 billion and an enterprise value of $2.4 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 72.8 and a forward price-to-earnings of 36.7. Its estimated growth rate for this year is 67.2%, and for next year it's pegged at 21.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $289.30 million and its total debt is $364.59 million.

The CEO just bought 8,000 shares, or about $400,000 worth of stock, at $49.97 per share. That same CEO also just bought 10,000 shares, or about $492,000 worth of stock, at $48.27 to $49.93 per share.

From a technical perspective, NuVasive is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last two month, with shares moving higher from its low of $41.52 to its recent high of $51.25 a share. During that downtrend, shares of NuVasive have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a near-term breakout trade.

If you're bullish on NuVasive, then I would look for long-biased trades as long as this stock is trending above some key near-term support at $47.91 a share and then once it breaks out above some near-term overhead resistance levels at $50.90 to its 52-week high of $51.25 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 755,472 shares. If that breakout triggers soon, then shares of NuVasive will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $55 to $60 a share, or even $65 a share.

A.M. Castle

Another metal fabrication player that insiders are jumping into here is A.M. Castle (CAS), which operates as a specialty metals and plastics distribution company in the U.S., Canada, Mexico, France, the U.K., Spain, China, and Singapore. Insiders are buying this stock into massive strength, since shares have soared by 95% over the last three months.

A.M. Castle & Co. has a market cap of $147 million and an enterprise value of $449 million. This stock trades at a cheap valuation, with a price-to-sales of 0.16 and a price-to-book of 1.17. Its estimated growth rate for this year is 39.2%, and for next year it's pegged at 49.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $13.37 million and its total debt is $313.97 million.

A beneficial owner just bought 136,988 shares, or about $822,000 worth of stock, at $5.98 to $6.02 per share.

From a technical perspective, A.M. Castle & Co. is currently trending just below its 200-day moving average and above its 50-day moving average, which is neutral trendwise. This stock has been consolidating and trending sideways over the last month and change, with shares moving between $5.81 on the downside and $7.01 on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern could trigger a big breakout trade for shares of A.M. Castle & Co.

If you're in the bull camp on A.M. Castle & Co., then I would look for long-biased trades as long as this stock is trending above some near-term support at $6.02 or at $5.81 a share and then once it breaks out above some near-term overhead resistance levels at $6.74 to $7.01 a share with volume that hits near or above its three-month average action of 259,953 shares. If that breakout materializes soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $8.21 to $9 a share, or even $10 a share.

Abercrombie & Fitch

One apparel stores player that insiders are loading up on here is Abercrombie & Fitch  (ANF), which operates as a specialty retailer of apparel for men, women, and kids. Insiders are buying this stock into notable weakness, since shares have dropped by 18.6% over the last six months.

Abercrombie & Fitch has a market cap of $1.5 billion and an enterprise value of $1.5 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 127.7 and a forward price-to-earnings of 22.2. Its estimated growth rate for this year is -53.9%, and for next year it's pegged at 39.4%. This is barley a cash-rich company, since the total cash position on its balance sheet is $383.22 million and its total debt is $342.12 million. This stock currently sports a dividend yield of 3.5%.

The president just bought 45,200 shares, or about $1 million worth of stock, at $22.16 per share.

From a technical perspective, Abercrombie & Fitch is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has just started to bounce to the upside a bit right off its 50-day moving average of $21.72 a share. That bounce is starting to push shares of Abercrombie & Fitch within range of triggering a big breakout trade above some key near-term overhead resistance levels.

If you're bullish on Abercrombie & Fitch, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $21.64 or above $21 a share and then once it breaks out above some near-term overhead resistance levels at $23 to $23.72 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 2.62 million shares. If that breakout gets set off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $26 to its 200-day at $27.07 a share, or even $28 to $29 a share.


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