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.

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.

Dominion Midstream Partners

One energy player that insiders are active in here is Dominion Midstream Partners  (DM) , which owns liquefied natural gas import, storage, regasification and transportation assets. Insiders are buying this stock into large weakness, since shares have fallen sharply by 26% over the last six months.

Dominion Midstream Partners has a market cap of $1.8 billion and an enterprise value of $2.1 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 21 and a forward price-to-earnings of 16.5. Its estimated growth rate for this year is 8.3%, and for next year it's pegged at 25.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $24.20 million and its total debt is $315.70 million. This stock currently sports a dividend yield of 3.8%.

A director just bought 56,744 shares, or about $1.42 million worth of stock at $24.90 per share. From a technical perspective, Dominion Midstream Partners is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly over the last five months, with shares falling off its high of $33.93 a share to its recent low of $24.16 a share. During that downtrend, shares of Dominion Midstream Partners have been consistently making lower highs and lower lows, which is bearish technical price action.

If you're bullish on Dominion Midstream Partners, then I would look for long-biased trades as long as this stock is trending above its recent low of $24.16 a share and then once it breaks out above some near-term overhead resistance levels at its 20-day moving average of $25.06 a share to its 50-day moving average of $25.71 a share and then above more key resistance levels at $26.24 to $26.27 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 136,523 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 $27.40 to $28, or even its 200-day moving average of $28.19 to $29.50 a share.

Akamai Technologies

A technology stock that insiders are in love with here is Akamai Technologies  (AKAM) , which provides cloud services for delivering, optimizing and securing content and business applications over the Internet in the U.S. and internationally. Insiders are buying this stock into modest weakness, since shares dropped sharply by 7.9% over the last six months.

Akamai Technologies has a market cap of $9 billion and an enterprise value of $8.7 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 28.4 and a forward price-to-earnings of 18. Its estimated growth rate for this year 2%, and for next year it's pegged at 11.3%. This is a cash-rich company, since the total cash position on its balance sheet is $868.71 million and its total debt is $628.97 million.

The CEO just bought 19,468 shares, or about $999,000 worth of stock, at $51.36 per share.

From a technical perspective, Akamai Technologies is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last month or so, with shares moving lower off its high of $55.94 a share to its recent low of $50.76 a share. During that downtrend, shares of Akamai Technologies have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on Akamai Technologies, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $50.76 to $50 a share and then once it breaks out above its 200-day moving average of $52.40 to its 20-day moving average of $53.42 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 2.20 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 $55 to$56, or even $58.50 a share.

Inovalon Holdings

Another technology player that insiders are jumping into here is Inovalon Holdings  (INOV) , which provides cloud-based data analytics and data-driven intervention platforms in the U.S. Insiders are buying this stock into notable weakness, since shares have fallen by 17.9% over the last six months.

Inovalon Holdings has a market cap of $2.4 billion and an enterprise value of $1.9 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 53 and a forward price-to-earnings of 30. Its estimated growth rate for this year -17.6%, and for next year it's pegged at 23.8%. This is a cash-rich company, since the total cash position on its balance sheet is $743.88 million and its total debt is $274.13 million.

A director just bought 30,000 shares, or about $468,000 worth of stock, at $16.22 per share.

From a technical perspective, Inovalon Holdings is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending over the last two months, with shares moving higher off its low of $13.85 a share to its recent high of $16.64 a share. During that uptrend, shares of Inovalon Holdings 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 big breakout trade above some key overhead resistance levels.

If you're in the bull camp on Inovalon Holdings, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $15 to $14.50 a share and then once it breaks out above some near-term overhead resistance levels at $16 to $16.25 a share and then above its 50-day moving average of $16.52 a share to $16.64 a share with volume that hits near or above its three-month average action of 612,367 shares. If that breakout fires off soon, then this stock will set up to re-fill some of its previous gap-down-day zone from August that started near $19.40 a share.

Array BioPharma

One biopharmaceutical player that insiders are loading up on here is Array BioPharma  (ARRY) , which focuses on the discovery, development and commercialization of small molecule drugs to treat patients with cancer in North America, Europe, and the Asia Pacific. Insiders are buying this stock into big strength, since shares have ripped higher by 26.9% over the last six months.

Array BioPharma has a market cap of $522 million and an enterprise value of $531 million. This stock trades at a premium valuation, with a price-to-book of 17.2. Its estimated growth rate for this year is -4.6%, and for next year it's pegged at 22.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $109.94 million and its total debt is $113.65 million.

A beneficial owner just bought 400,000 shares, or about $1.40 million worth of stock, at $3.50 to $3.54 per share.

From a technical perspective, Array BioPharma is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been consolidating and trending sideways over the last two months, with shares moving between $3.10 on the downside and $3.77 on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern could easily trigger a big breakout trade for shares of Array BioPharma.

If you're bullish on Array BioPharma, then I would look for long-biased trades as long as this stock is trending above its 20-day moving average of $3.50 a share or its 200-day moving average of $3.37 a share and then once it breaks out above some near-term overhead resistance levels at $3.75 to $3.77 a share and then above $4a 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 1.98 million shares. If that breakout develops soon, then this stock will set up to re-fill some of its previous gap-down-day zone from August that started near $4.60 a share.

Freshpet

My final stock with some decent insider buying is consumer goods player Freshpet  (FRPT) , which manufactures and markets natural fresh, refrigerated meals and treats for dogs and cats in the U.S. and Canada. Insiders are buying this stock into notable strength, since shares have risen by 18.3% over the last six months.

Freshpet a market cap of $305 million and an enterprise value of $297 million. This stock trades at a premium valuation, with a forward price-to-earnings of 61. Its estimated growth rate for this year is -9.1%, and for next year it's pegged at 225%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.72 million and its total debt is $8 million.

The CEO just bought 50,382 shares, or about $498,000 worth of stock, at $9.75 to $10.16 per share.

From a technical perspective, Freshpet is currently trending above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock has been downtrending over the last two months, with shares falling off its high of $11.81 a share to its recent low of $8.86 a share. During that downtrend, shares of Freshpet have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on Freshpet, then I would look for long-biased trades as long as this stock is trending above its 200-day moving average of $8.46 a share or above more near-term support at $8.20 a share and then once it breaks out above some near-term overhead resistance levels at $9.60 to its 20-day moving average of $10.02 a share with volume that hits near or above its three-month average action of 199,033 shares. If that breakout fires off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $10.30 to $10.65, or even $10.85 to $11 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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