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.

Hershey

One consumer goods player that insiders are loading up on here is Hershey (HSY), which manufactures, imports, markets, distributes, and sells confectionery products. Insiders are buying this stock into modest strength, since shares have risen by 7.7% over the last six months.

Hershey has a market cap of $21.1 billion and an enterprise value of $23.9 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 26.4 and a forward price-to-earnings of 21.4. Its estimated growth rate for this year is 4.6%, and for next year it's pegged at 7.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $333.33 million and its total debt is $3.22 billion. This stock currently sports a dividend yield of 2.5%.

A beneficial owner just bought 49,500 shares, or about $5.02 million worth of stock, at $101.60 per share.

From a technical perspective, Hershey is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently formed a double bottom chart pattern at $94.20 to $94.03 a share. Following that potential bottom, this stock has now started to spike higher and move back above a number of key moving averages. That spike is now quickly pushing shares of Hershey within range of triggering a major breakout trade above some key overhead resistance levels.

If you're bullish on Hershey then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $96.98 a share or above those recent double bottom support levels and then once it breaks out above some near-term overhead resistance levels at $102.95 to $103.36 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 volume of 1.43 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 from August that started near $112 a share.

Abbott Laboratories

Another healthcare player that insiders are jumping into here is Abbott Laboratories (ABT), which manufactures and sells health care products worldwide. Insiders are buying this stock into modest strength, since shares are up by 5% over the last six months.

Abbott Laboratories has a market cap of $59.1 billion and an enterprise value of $62.6 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 43.8 and a forward price-to-earnings of 16.4. Its estimated growth rate for this year is 2.8%, 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 $4.51 billion and its total debt is $8.51 billion. This stock currently sports a dividend yield of 2.5%.

The CEO just bought 369,950 shares, or about $14.99 million worth of stock, at $40.35 to $40.70 per share.

From a technical perspective, Abbott Laboratories 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 and change, with shares moving lower off its high of $45.50 a share to its recent low of $38.30 a share. During that downtrend, shares of Abbott Laboratories have been making mostly lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to rebound off that $38.30 low, and it's starting to move within range of triggering a near-term breakout trade.

If you're bullish on Abbott Laboratories then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $39.05 to $38.30 a share and then once it breaks out above its 200-day moving average of $40.39 a share to its 50-day moving average of $40.80 a share and then above more resistance at $41.53 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 9.02 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 $43.50 to $44, or even $45.50 to its 52-week high of $46.38 a share.

OneMain Holdings

One consumer lending player that insiders are jumping into big here is OneMain Holdings (OMF), which provides consumer finance and insurance products and services. Insiders are buying this stock into massive weakness, since shares have fallen sharply by 30.7% over the last six months.

OneMain Holdings has a market cap of $2.8 billion and an enterprise value of $16.1 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 5.4. Its estimated growth rate for this year is 57.4%, and for next year it's pegged at 2.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $658 million and its total debt is $13.99 billion.

The CEO just bought 50,000 shares, or about $918,000 worth of stock, at $18.37 per share.

From a technical perspective, OneMain Holdings 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 $28 a share to under $17 a share with monster downside volume flows. Following that move, shares of OneMain Holdings have started to rebound off its new 52-week low of $16.03 a share, and it's now trending within range of triggering a big breakout trade.

If you're in the bull camp on OneMain Holdings, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $18 or at its new 52-week low of $16.03 a share and then once it breaks out above some near-term overhead resistance at $21.20 a share with volume that hits near or above its three-month average action of 775,675 shares. If that breakout develops soon, then this stock will set up to re-fill some of its previous gap-down-day zone from earlier this month that started near $28 a share.

Datawatch

One technology player that insiders are in love with here is Datawatch (DWCH), which designs, develops, markets, and distributes business computer software products to self-service data preparation and visual data discovery markets in the U.S. and internationally. Insiders are buying this stock into large strength, since shares have soared by 28.9% over the last six months.

Datawatch has a market cap of $82 million and an enterprise value of $55 million. This stock trades at a reasonable valuation, with a price-to-sales of 2.74 and a price-to-book of 2.46. Its estimated growth rate for the next quarter is 57.1%, and for this year it's pegged at 66.7%. This is a cash-rich company, since the total cash position on its balance sheet is $28.03 million and its total debt is zero.

A beneficial owner just bought 683,868 shares, or about $4.83 million worth of stock, at $6.94 per share.

From a technical perspective, Datawatch 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 uptrending over the last few weeks, with shares moving higher off its low of $4.35 a share to its recent high of $7.40 a share. During that uptrend, shares of Datawatch 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 key overhead resistance levels.

If you're bullish on Datawatch, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $6.40 to $6.20 a share or above its 200-day moving average of $5.84 a share and then once it breaks out above its 50-day moving average of $7.27 a share to $7.40 a share and then above more key resistance levels at $7.75 to its 52-week high of $8 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 126,655 shares. If that breakout triggers 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 $9 to $10 a share.

DDR Corp.

My final stock with some big insider buying is financial player DDR Corp. (DDR), which is an equity real estate investment trust (REIT). It invests in the real estate markets of the U.S. and Puerto Rico. Insiders are buying this stock into notable weakness, since shares have fallen by 13.9% over the last six months.

DDR Corp. a market cap of $5.5 billion and an enterprise value of $11.1 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 59.2 a forward price-to-earnings of 12.8. Its estimated growth rate for this year is 3.3%, and for next year it's pegged at -6.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $20.66 million and its total debt is $4.97 billion. This stock currently sports a dividend yield of 5%.

A beneficial owner and director just bought 281,301 shares, or about $4.19 million worth of stock, at $14.88 to $14.99 per share.

From a technical perspective, DDR Corp. 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 three months and change, with shares moving lower off its high of $19.70 a share to its new 52-week low of $14.67 a share. During that downtrend, shares of DDR Corp. have been consistently making lower highs and lower lows, which is bearish technical price action.

If you're bullish on DDR Corp., then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $14.67 a share and then once it breaks out above some near-term overhead resistance levels at $15.50 to $15.69 a share with volume that registers near or above its three-month average action of 3.43 million 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 $16.45 a share to $16.63, or even its 200-day moving average of $17.23 to $18 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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