5 Stocks Insiders Love Right Now

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.

Xenoport


One biopharmaceutical stock that insiders are loading up on here is Xenoport  (XNPT) , which focuses on developing and commercializing a portfolio of product candidates for the treatment of neurological and other disorders. Insiders are buying this stock into large weakness, since shares have dropped by 29.7% over the last six months.

Xenoport has a market cap of $274 million and an enterprise value of $234 million. This stock trades at a premium valuation, with a price-to-sales of 7.97 and a price-to-book of 8.89. Its estimated growth rate for this year is -69.1%, and for next year it's pegged at 38.7%. This is just barely a cash-rich company, since the total cash position on its balance sheet is $152.39 million and its total debt is $111.64 million.

A beneficial owner just bought 4,883,761 shares, or about $18.91 million worth of stock, at $3.76 to $3.92 per share.

From a technical perspective, Xenoport 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 off its low of $3.70 a share to its intraday high on Tuesday of $4.43 a share. During that uptrend, shares of Xenoport 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 Xenoport, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $4 or above its recent low of $3.70 a share and then once it breaks out above its 20-day moving average of $4.50 a share to some more key resistance around $4.75 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 938,954 shares. If that breakout takes hold 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 $4.98 to $5.25, or even $5.30 to around $5.70 a share.

Seattle Genetics


Another biotechnology player that insiders are adding a ton of stock in here is Seattle Genetics  (SGEN) , which develops and commercializes antibody-based therapies for the treatment of cancer. Insiders are buying this stock into big weakness, since shares have dropped sharply by 28.3% over the last six months.

Seattle Genetics has a market cap of $4.1 billion and an enterprise value of $3.4 billion. This stock trades at a premium valuation, with a price-to-sales of 12.68 and a price-to-book of 6.21. Its estimated growth rate for this year is -5.4%, and for next year it's pegged at 22.4%. This is a cash-rich company, since the total cash position on its balance sheet is $649.65 million and its total debt is zero.

A director just bought 1,001,471 shares, or about $29.67 million worth of stock, at $29.20 to $30.21 per share.

From a technical perspective, Seattle Genetics 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 off its low of $26.02 to its recent high of $32.80 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of Seattle Genetics within range of triggering a near-term breakout trade above some key overhead resistance levels.

If you're in the bull camp on Seattle Genetics, then I would look for long-biased trades as long as this stock is trending above some near-term support at $29.09 a share or above more support around $28 a share and then once it breaks out above its 20-day moving average of $31.23 a share to some more key resistance levels at $32.80 to $34.36 a share with volume that hits near or above its three-month average action of 1.25 million 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 $36.60 to around $38.50, or even its 200-day moving average of $41.99 a share.

Restaurant Brands International


One restaurants operator that insiders are in love with here is Restaurant Brands International  (QSR) , which owns and operates quick service restaurants under the Burger King and Tim Hortons brand names. Insiders are buying this stock into notable weakness, since shares have fallen by 16.7% over the last six months.

Restaurant Brands International has a market cap of $7.4 billion and an enterprise value of $15.3 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 65.6 and a forward price-to-earnings of 21.8. Its estimated growth rate for this year is 7.6%, and for next year it's pegged at 18.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $757.80 million and its total debt is $8.72 billion. This stock currently sports a dividend yield of 1.71%.

A director just bought 78,125 shares, or about $2.55 million worth of stock, at $32.74 per share.

From a technical perspective, Restaurant Brands International is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending over the last few weeks, with shares moving higher off its low of $29.29 a share to its recent high of $34.96 a share. During that uptrend, shares of Restaurant Brands International 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 Restaurant Brands International, then I would look for long-biased trades as long as this stock is trending above some near-term support at around $31 a share and then once it breaks out above its 50-day moving average of $33.96 a share to some more key resistance at $34.96 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 action of 1.70 million shares. If that breakout triggers soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $37.26 to $37.75, or even $39 to $41 a share.

Bank of New York Mellon

One asset management player that insiders are in love with here is Bank of New York Mellon  (BK) , which provides financial products and services to institutions, corporations and high-net-worth individuals in the U.S. and internationally. Insiders are buying this stock into notable weakness, since shares have slid lower by 15.4% over the last six months.

Bank of New York Mellon has a market cap of $38 billion and an enterprise value of -$70.8 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 12.9 and a forward price-to-earnings of 10.2. Its estimated growth rate for this year is 6%, 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 $167.86 billion and its total debt is $58.97 billion. This stock currently sports a dividend yield of 1.9%.

A director owner just bought 891,190 shares, or about $31.28 million worth of stock, at $35.10 per share.

From a technical perspective, Bank of New York Mellon is currently trending well 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 off its low of $32.20 a share to its recent high of $35.69 a share. During that uptrend, shares of Bank of New York Mellon 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 Bank of New York Mellon, then I would look for long-biased trades as long as this stock is trending above some near-term support at around $34 a share and then once it breaks out above some near-term overhead resistance levels $35.69 to $36.23 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 7.30 million shares. If that breakout develops 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 $37.18 to $39, or even $39 to $40 a share.

SPX Flow


One final stock with some decent insider buying is industrial goods player SPX Flow  (FLOW) , which provides various engineered solutions worldwide. Insiders are buying this stock into massive weakness, since shares have plunged by 52.8% over the last six months.

SPX Flow has a market cap of $729 million and an enterprise value of $1.47 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 8.2. This is not a cash-rich company, since the total cash position on its balance sheet is $295.90 million and its total debt is $1.04 billion.

The president just bought 37,000 shares, or about $626,000 worth of stock at $16.94 per share. From a technical perspective, SPX Flow is currently trending below both its 50-day and 20-day moving averages, which is bearish. This stock recently gapped-down sharply lower from around $22 a share to just below $16 a share with heavy downside volume flows. Following that move, shares of SPX Flow have now started to rebound off its recent low of $14.85 a share, and it's now quickly moving within range of triggering a big breakout trade.

If you're bullish on SPX Flow, then I would look for long-biased trades as long as this stock is trending above some near-term support at $16.25 a share or above its new 52-week low of $14.85 a share and then once it breaks out above some key overhead resistance at around $18 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 473,390 shares. If that breakout triggers soon, then this stock will set up to re-fill some of its previous gap-down-day zone that started near $22 a share.

 

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

More from Opinion

Nasdaq Exec: Exchange Is 'All-In' on Using Blockchain Technology

Nasdaq Exec: Exchange Is 'All-In' on Using Blockchain Technology

Sears CEO Eddie Lampert Looks Like He Is Sucking Company Dry

Sears CEO Eddie Lampert Looks Like He Is Sucking Company Dry

It's Dumb to Think Legalizing Weed Is Still a Political Issue

It's Dumb to Think Legalizing Weed Is Still a Political Issue

AAP Exclusive: Cramer Says The President is No Longer on the Side of the Bulls

AAP Exclusive: Cramer Says The President is No Longer on the Side of the Bulls

Why It Makes Perfect Sense for Netflix and Amazon to Buy Up Movie Theaters

Why It Makes Perfect Sense for Netflix and Amazon to Buy Up Movie Theaters