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.

Basic Energy Services

BAS Chart BAS data by YCharts

One oil and gas equipment and services player that insiders are loading up on here is Basic Energy Services  (BAS), which provides well site services to oil and natural gas drilling and producing companies in the U.S. Insiders are buying this stock into strength, since shares have jumped higher by 16.6% over the last three months.

Basic Energy Services has a market cap of $322 million and an enterprise value of $1.1 billion. This stock trades at a cheap valuation, with a price-to-sales of 0.21 and a price-to-book of 0.96. Its estimated growth rate for this year is -831.5%, and for next year it's pegged at 24.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $104.94 million and its total debt is $925.03 million.

A director just bought 148,500 shares, or about $1.07 million worth of stock, at $7.19 to $7.30 per share.

From a technical perspective, Basic Energy Services is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently started to bounce higher right off some near-term support at $6.96 a share. That bounce is coming after shares of Basic Energy Services fell sharply from its April high of $10.50 to that $6.96 low. This stock is now starting to trend within range of triggering a near-term breakout trade.

If you're bullish on Basic Energy Services, then I would look for long-biased trades as long as this stock is trending above that $6.96 low and then once it breaks out above its 20-day moving average of $8.09 and its 50-day moving average of $8.72 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 volume of 2.97 million shares.

If that breakout hits soon, then shares of Basic Energy Services will set up to re-test or possibly take out its next major overhead resistance levels at $9.23 to its 200-day moving average of $9.97 a share, or its $10.25 to $10.50 a share.

Famous Dave's of America

DAVE Chart DAVE data by YCharts

Another restaurant player that insiders are warming up to here is Famous Dave's of America  (DAVE), which. develops, owns, operates and franchises restaurants under the Famous Dave's name. Insiders are buying this stock into large weakness, since shares have dropped by 26.9% over the last three months.

Famous Dave's of America has a market cap of $140.5 million and an enterprise value of $154.6 million. This stock trades at a fair valuation, with a trailing price-to-earnings of 55.6 and a forward price-to-earnings of 21.3 Its estimated growth rate for this year is -24.7%, and for next year it's pegged at 46.9%. This is not a cash-rich company, since the total cash position on its balance sheet is $2.01 million and its total debt is $18.27 million.

A beneficial owner just bought 585,703 shares, or about $11.24 million worth of stock, at $18.88 per share.

From a technical perspective, Famous Dave's of America 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 month and change, with shares moving lower from its high of $30.94 to its recent low of $18.22 a share. During that downtrend, this stock has been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of Famous Dave's of America have now started to rebound off that $18.22 low and it's quickly moving within range of triggering a big breakout trade.

If you're in the bull camp on Famous Dave's of America, then I would look for long-biased trades as long as this stock is trending above that recent low of $18.22 and then once it breaks out above its 20-day moving average of $20.78 and then above some more near-term overhead resistance levels at $21.90 to $21.98 a share with volume that hits near or above its three-month average action of 53,209 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 its 50-day moving average of $24.44 to its 200-day moving average of $26.82 a share.

Gladstone Investment

GAIN Chart GAIN data by YCharts

One business development player that insiders are jumping into here is Gladstone Investment  (GAIN), which invests in small and medium sized private businesses, seeking to achieve returns from current income and capital gains through debt and equity investments. Insiders are buying this stock into notable strength, since shares have trended higher by 12.4% over the last six months.

Gladstone Investment has a market cap of $233 million and an enterprise value of $435 million. This stock trades at a fair valuation, with a trailing price-to-earnings of 4.1 and a forward price-to-earnings of 9.6. Its estimated growth rate for this year is 1.3%, and for next year it's pegged at 5.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $4.92 million and its total debt is $205.30 million. This stock currently sports a dividend yield of 9.9%.

The CEO just bought 158,500 shares, or about $1.25 million worth of stock, at $7.86 to $7.92 per share.

From a technical perspective, Gladstone Investment is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending for the last four months, with shares moving higher from its low of $7.06 to its recent high of $7.89 a share. During that move, shares of Gladstone Investment have been making mostly higher lows and higher highs, which is bullish technical price action. That trend has now started to push this stock within range of triggering a near-term breakout trade.

If you're bullish on Gladstone Investment, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $7.53 and then once it breaks out above its 52-week high of $8.04 a share with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average action of 137,600 shares. If that breakout begins soon, then this stock will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $10 to $12 a share.

Valeant Pharmaceuticals

VRX Chart VRX data by YCharts

One health care player that insiders are active in here is Valeant Pharmaceuticals  (VRX), which develops, manufactures and markets pharmaceuticals, over-the-counter products and medical devices worldwide. Insiders are buying this stock into massive strength, since shares have soared by 65.9% over the last six months.

Valeant Pharmaceuticals has a market cap of $79.8 billion and an enterprise value of $102.2 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 79.5. 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 vice president just bought 12,900 shares, or about $2.99 million worth of stock, at $232.51 per share.

From a technical perspective, Valeant Pharmaceuticals is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last six month, with shares moving higher from its low of $138.80 to its recent high of $246.01 a share. During that uptrend, shares of Valeant Pharmaceuticals have been making mostly 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 Valeant Pharmaceuticals, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $225.35 or above its 50-day moving average of $224.24 and then once it breaks out above some key near-term overhead resistance levels at $240 to its 52-week high of $246.01 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 1.67 million shares. If that breakout gets started soon, then this stock will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $260 to $270 a share, or $280 a share.

Prospect Capital

PSEC Chart PSEC data by YCharts

One final stock with some large insider buying is Prospect Capital  (PSEC), which is a business development company. Insiders are buying this stock into notable weakness, since shares have dropped by 9.2% over the last three months.

Prospect Capital has a market cap of $2.7 billion and an enterprise value of $5.7 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 8.3 and a forward price-to-earnings of 7.4. Its estimated growth rate for the next quarter is -7.1%, and for this year it's pegged at -12.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $63.62 million and its total debt is $2.98 billion. This stock currently sports a dividend yield of 12.8%.

The CEO just bought 140,000 shares, or about $1.04 million worth of stock, at $7.46 per share. From a technical perspective, Prospect Capital is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending strong over the last few weeks, with shares moving higher from its low of $7.18 to its recent high of $7.83 a share. During that uptrend, shares of Prospect Capital has 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 Prospect Capital, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $7.60 to $7.50 a share and then once it breaks out above some near-term overhead resistance levels at $7.83 to its 50-day moving average of $7.96 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 2.77 million shares. If that breakout begins soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $8.20 to its 200-day moving average of $8.34, or $8.50 to $9 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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