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 vs. reward calculation 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 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.

Lands' End

One services player that insiders are loading up on here is Lands' End (LE) , a multi-channel retailer. Insiders are buying this stock into big weakness, since shares have fallen sharply by 36.1% over the last six months.

Lands' End has a market cap of $491 million and an enterprise value of $763 million. This stock trades at a reasonable valuation, with a forward price-to-earnings ratio of 21. Its estimated growth rate for this year is -61.1%, and for next year it's pegged at 49%. This is not a cash-rich company, since the total cash position on its balance sheet is $210.74 million and its total debt is $497.09 million.

A beneficial owner just bought 255,436 shares, or about $3.8 million worth of stock, at $14.89 per share. That same beneficial owner also just bought 76,0001 shares, or about $1.13 million worth of stock, at $14.98 per share.

From a technical perspective, Lands' End is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double bottom chart pattern, after shares found some buying interest at $14.03 to $14.27 a share over the last two months and change. Following that potential bottom, this stock has now started to spike higher off some near-term support at $14.82 a share. That spike is now quickly pushing this stock within range of triggering a near-term breakout trade.

If you're bullish on Lands' End, then I would look for long-biased trades as long as this stock is trending above those recent double-bottom support levels -- and then once it breaks out above some near-term overhead resistance levels at $15.50 to $15.67 a share and then above its 20-day moving average of $16.02 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 183,842 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 its 50-day moving average of $16.79 to $18, or even $18.50 to $19.36 a share.

AZZ

Another industrial goods player that insiders are active in is AZZ (AZZ) , which provides galvanizing services, welding solutions, specialty electrical equipment and engineered services to the power generation, transmission, distribution and industrial markets. Insiders are buying this stock into notable weakness, since shares have dropped by 10.1% over the last three months.

AZZ has a market cap of $1.4 billion and an enterprise value of $1.7 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 20. This is not a cash-rich company, since the total cash position on its balance sheet is $15.91 million and its total debt is $301.38 million. This stock currently sports a dividend yield of 1.2%.

The CEO just bought 7,500 shares, or about $414,000 worth of stock, at $55.24 per share.

From a technical perspective, AZZ 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 few weeks, with shares moving lower off its high of $66.37 a share to its recent low of $53.99 a share. During that downtrend, this stock has been consistently making lower highs and lower lows, which is bearish technical price action.

If you're bullish on AZZ, then I would look for long-biased trades as long as this stock is trending above some near-term support at $53.99 a share -- and then once it breaks out above some near-term overhead resistance levels at $55.13 to $55.50 a share and then above $56.50 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 157,940 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 200-day moving average of $57.42 a share to $58, or even its 20-day moving average of $61.55 a share.

Idera Pharmaceuticals

One clinical-stage biopharmaceutical player that insiders are jumping into is Idera Pharmaceuticals (IDRA) , which focuses on the discovery, development and commercialization of therapeutics for oncology and rare diseases in the U.S. Insiders are buying this stock into modest weakness, since shares have fallen by 7% over the last six months.

Idera Pharmaceuticals has a market cap of $270 million and an enterprise value of $172 million. This stock trades at a premium valuation, with a price-to-sales ratio of 289.50 and a price-to-book ratio of 3.82. Its estimated growth rate for this year is -7.1%, and for next year it's pegged at -2.2%. This is a cash-rich company, since the total cash position on its balance sheet is $61.46 million and its total debt is $635,000.

A director just bought 3,250,000 shares, or about $6.5 million worth of stock, at $2 per share.

From a technical perspective, Idera Pharmaceuticals 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 month and change, with shares falling sharply off its high of $3.33 a share to its recent low of $1.81 a share. During that downtrend, this stock has been making mostly lower highs and lower lows, which is bearish technical price action.

If you're in the bull camp on Idera Pharmaceuticals, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $1.81 to $1.70 a share, and then once it breaks out above some near-term overhead resistance levels at $1.98 to its 50-day moving average of $2.12 a share with volume that registers near or above its three-month average action of 1.10 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 20-day moving average of $2.38 a share to possibly $2.66 a share.

PRGX Global

One business services player that insiders are in love with is PRGX Global (PRGX) , which provides recovery audit services to businesses and government agencies with payment transactions and procurement environments. Insiders are buying this stock into modest strength, since shares have risen by 7% over the last six months.

PRGX Global has a market cap of $110 million and an enterprise value of $95.5 million. This stock trades at a cheap valuation, with a forward price-to-earnings ratio of 21. Its estimated growth rate for this year is 158.3%, and for next year it's pegged at 228.6%. This is a cash-rich company, since the total cash position on its balance sheet is $15.17 million and its total debt is zero.

A beneficial owner just bought 83,460 shares, or about $408,000 worth of stock, at $4.90 per share.

From a technical perspective, PRGX Global is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last few weeks, with shares moving higher off its low of $4.59 a share to its recent high of $5.30 a share. During that uptrend, shares of PRGX Global have been making mostly higher lows and higher highs, which is bullish technical price action. That uptrend has now pushed this stock within range of triggering a near-term breakout trade.

If you're bullish on PRGX Global, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $4.83 a share, and then once it breaks out above some near-term overhead resistance levels at $5.30 to $5.40 a share and then above more resistance at $5.50 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 39,788 shares.

If that breakout hits 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 $5.81 to $6, or even $6.50 to $7 a share.

Monsanto

My final stock with some decent insider buying is basic materials player Monstanto (MON) , which provides agricultural products for farmers worldwide. Insiders are buying this stock into notable strength, since shares have risen by 14.2% over the last six months.

Monsanto has a market cap of $44 billion and an enterprise value of $52 billion. This stock trades at a fair valuation, with a trailing price-to-earnings ratio of 34. This is not a cash-rich company, since the total cash position on its balance sheet is $1.61 billion and its total debt is $9.04 billion. This stock currently has a dividend yield of 2.09%.

A director just bought 3,500 shares, or about $361,000 worth of stock, at $103.23 per share.

From a technical perspective, Monsanto is currently trending near 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 few weeks, with shares moving between $100.80 a share on the downside and around $104.50 a share on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern could trigger a near-term breakout for shares of Monsanto.

If you're bullish on Monsanto, then I would look for long-biased trades as long as this stock is trending above some near-term support at $100.80 a share, and then once it breaks out above some near-term overhead resistance levels at $103 to $104 a share and then above its 50-day moving average of $104.40 a share with volume that registers near or above its three-month average action of 3.93 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 $106 to $109, or even $113 a share.

-- Written by Roberto Pedone in Delafield, Wis.

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Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com.

You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

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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