Insiders Love These 5 Stocks 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.

Stocks with notable insider activity is something that I tweet about on a regular basis. These are also the exact type of stocks that I love to trade and alert in real-time.

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.

Abbott Laboratories

One stock that insiders are loading up on here is Abbott Laboratories  (ABT) , which is engaged in the discovery, development, manufacture and sale of a line of health care products. Insiders are buying this stock into notable strength, since shares have trended up by 18.9% over the last six months.

Abbott Laboratories has a market cap of $66.2 billion and an enterprise value of $70.8 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 29.7 and a forward price-to-earnings of 18.3. Its estimated growth rate for this year is 2.3%, and for next year it's pegged at 11.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $3.96 billion and its total debt is $8.59 billion. This stock currently sports a dividend yield of 2.3%.

The CEO just bought 731,500 shares, or about $31.62 million worth of stock at $43.23 per share. From a technical perspective, Abbott Laboratories 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 and change, with shares moving higher off its low of $36.53 a share to its recent high of $45.79 a share. During that uptrend, shares of Abbott Laboratories 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 big breakout trade above some past overhead resistance levels.

If you're bullish on Abbott Laboratories, then I would look for long-biased trades as long as this stock is trending above its 20-day moving average of $42.84 a share and then once it breaks out above some past overhead resistance at $46 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 10.89 million shares. If that breakout hits soon, then this stock will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $51.17 a share.

Infinera

Another stock that insiders are jumping into here is Infinera  (INFN) , which provides optical transport networking equipment, software and services worldwide. Insiders are buying this stock into large weakness, since shares have fallen sharply by 40.8% over the last six months.

Infinera 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 28.5 and a forward price-to-earnings of 20. Its estimated growth rate for this year -44.9%, and for next year it's pegged at 0%. This is a cash-rich company, since the total cash position on its balance sheet is $257.75 million and its total debt is $128.33 million.

The CEO just bought 100,000 shares, or about $853,000 worth of stock, at $8.54 per share.

From a technical perspective, Infinera is currently trending well below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped-down sharply lower from $13.24 a share to its new 52-wek low of $8.20 a share with heavy downside volume flows. Following that move, shares of Infinera have now started to rebound a bit off that $8.20 low, and it's beginning to trend within range of triggering a near-term breakout trade.

If you're bullish on Infinera then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $8.20 a share and then once it breaks out above some near-term overhead resistance at $8.85 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 action of 2.97 million shares. If that breakout fires off soon, then this stock will set up to re-fill some of its previous gap-down-day zone that started at $13.24 a share.

General Electric

One industrial goods player that insiders are active in here is General Electric  (GE) , which operates as an infrastructure and financial services company worldwide. Insiders are buying this stock into modest strength, since shares are up 9.9% over the last six months.

General Electric has a market cap of $285.5 billion and an enterprise value of $428.3 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 26.2 and a forward price-to-earnings of 17.9. Its estimated growth rate for this year 14.5%, and for next year it's pegged at 15.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $10 billion and its total debt is $156.40 billion. This stock currently sports a dividend yield of 2.9%.

The CEO just bought 50,000 shares, or about $1.57 million worth of stock, at $31.45 per share.

From a technical perspective, General Electric is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been downtrending over the last few weeks, with shares moving lower off its high of $33 a share to its recent low of $31 a share. During that slide, shares of General Electric have been consistently making lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to bounce a bit off its 50-day moving average of $30.98 a share, and that bounce is quickly pushing the stock within range of triggering a near-term breakout trade.

If you're in the bull camp on General Electric, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $30.98 a share and then once it breaks out above some near-term overhead resistance levels at $31.50 to its 20-day moving average of $31.99 a share with volume that hits near or above its three-month average action of 35.67 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 52-week high of $33 a share. Any high-volume move above $33 will then give this stock a chance to tag $35 to $40 a share.

From a fundamental perspective, GE is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. Cramer and Research Director Jack Mohr recently wrote:

We believe it will take time for traditional multi-industrial investors to appreciate the power of the company's strategic transformation. This involves a laser focus on ushering in a new era of industrial productivity driven not by traditional supply-chain optimization processes but through building a cloud-based ecosystem of data analytics, software and device control apps that connect industrial equipment to cutting-edge "Internet of Things" technology. GE can draw upon its massive, diversified end-market base, extracting valuable insights that can make the businesses it serves more efficient. While it is clear GE's strategic shift has the potential to be radically transformative, the initiative remains in the early innings, set to significantly accelerate in 2017 and beyond. Since software and data analytics are not in the wheelhouse of most traditional industrial investors' expertise, limited ability to analyze and quantify GE Digital's potential has a notable impact on GE's shareholder base: The fading interest from stalwart institutional industrial portfolio managers (which prefer to adopt a "wait and see stance") has carved out room for long-term investors such as ourselves who are essentially investing in the company's future, which involves more than a "hope trade" around GE Digital. An outsized buyback, continued cost-out and potential balance sheet usage/M&A in 2016 are among the major drivers for further re-rating, while the combination of Capital asset sales, an improving margin structure, accretion from Alstom, potential M&A and a higher-than-peer dividend yield continue to make GE one of the most compelling industrial stories long term.

Altisource Portfolio Solutions

One business services player that insiders are in love with here is Altisource Portfolio Solutions  (ASPS) , which operates as a marketplace and transaction solutions provider for the real estate, mortgage, and consumer debt industries in the U.S. Insiders are buying this stock into notable weakness, since shares have fallen by 14.9% over the last six months.

Altisource Portfolio Solutions has a market cap of $440.5 million and an enterprise value of $761.3 million. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 15.8 and a forward price-to-earnings of 4.6. Its estimated growth rate for this year is 4.8%, and for next year it's pegged at -10%. This is not a cash-rich company, since the total cash position on its balance sheet is $158.57 million and its total debt is $479.38 million.

A beneficial owner just bought 172,804 shares, or about $4.12 million worth of stock, at $23.78 per share.

From a technical perspective, Altisource Portfolio Solutions is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last three months, with shares moving lower off its high of $32.55 a share to its recent low of $21.75 a share. During that downtrend, shares of Altisource Portfolio Solutions have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on Altisource Portfolio Solutions, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $23 a share or at $21.75 a share and then once it breaks out above some near-term overhead resistance levels at $25 to its 20-day moving average of $25.99 a share and then above its 200-day moving average of $27.16 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 503,022 shares. If that breakout kicks off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $30 to $31.40, or even $32.55 a share.

SunCoke Energy

My final stock with some decent insider buying is basic materials player SunCoke Energy  (SXC) , which operates as an independent producer of coke in the Americas. Insiders are buying this stock into monster strength, since shares have exploded higher by 114% over the last six months.

SunCoke Energy a market cap of $456.8 million and an enterprise value of $1.2 billion. This stock trades at reasonable valuation, with a price-to-sales of 0.36 and a price-to-book of 1.60. Its estimated growth rate for this year is -70.6%, and for next year it's pegged at -340%. This is not a cash-rich company, since the total cash position on its balance sheet is $108 million and its total debt is $888.40 million.

A beneficial owner just bought 291,478 shares, or about $2.03 million worth of stock, at $6.94 to $6.99 per share. That same beneficial owner also just bought 215,517 shares, or about $1.55 million worth of stock, at $7.20 per share.

From a technical perspective, SunCoke Energy is currently trending below above both its 50-day and 200-day moving averages, which is bullish This stock has been uptrending over the last two months, with shares moving higher off its low of $5.18 a share to its recent high of $8.19 a share. During that uptrend, shares of SunCoke Energy have been making mostly higher lows and higher highs, which is bullish technical price action. That strong move has now pushed this stock within range of triggering a big breakout trade.

If you're bullish on SunCoke Energy, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $6.43 a share or above more near-term support at $6.28 a share and then once it breaks out above some near-term overhead resistance levels at $7.50 to $8 a share and then above more resistance at $8.20 a share with volume that hits near or above its three-month average action of 578,020 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 $9.70 to $11, or even $12 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.

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