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.

Paycom Software

One technology player that insiders are in love with here is Paycom Software (PAYC) , which provides cloud-based human capital management software solutions for small to mid-sized companies in the U.S. Insiders are buying this stock into modest strength, since shares have risen by 6.9% over the last six months.

Paycom Software has a market cap of $2.7 billion and an enterprise value of $2.6 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 67 and a forward price-to-earnings of 43.8. Its estimated growth rate for this year is 110%, 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 $74.50 million and its total debt is $30.09 million.

The CEO just bought 25,000 shares, or about $1.14 million worth of stock, at $45.73 per share.

From a technical perspective, Paycom Software 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 two months, with shares moving higher off its low of $39.15 a share to its recent high of $47.60 a share. During that uptrend, shares of Paycom Software 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 Paycom Software then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $44.31 a share or above its 200-day moving average of $43.90 a share and then once it breaks out above some near-term overhead resistance levels at $46.61 to $47.60 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 947,944 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 November that started near $52.50 a share.

Wynn Resorts

Another entertainment player that insiders are jumping into here is Wynn Resorts  (WYNN) , which develops, owns, and operates destination casino resorts. Insiders are buying this stock into notable weakness, since shares have dropped by 12.6% over the last six months.

Wynn Resorts has a market cap of $9 billion and an enterprise value of $16 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 41.9 and a forward price-to-earnings of 20.9. Its estimated growth rate for this year is 10.8%, and for next year it's pegged at 11.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.74 billion and its total debt is $9.44 billion. This stock currently sports a dividend yield of 2.1%.

A director just bought 37,500 shares, or about $3.51 million worth of stock, at $93.83 per share.

From a technical perspective, Wynn Resorts 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 and change, with shares falling off its high of $104.90 a share to its intraday low on Wednesday of $88 a share. During that downtrend, shares of Wynn Resorts have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on Wynn Resorts then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $86 to $85 a share and then once it breaks out above some near-term overhead resistance at around $91 a share with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average action of 3.22 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 $93.45 a share or its 200-day moving average of $94.44 a share, or even its 20-day moving average of $95.89 a share.

Virtu Financial

One financial player that insiders are active in here is Virtu Financial (VIRT) , which provides market making and liquidity services to the financial markets worldwide. Insiders are buying this stock into notable weakness, since shares have fallen by 10.9% over the last six months.

Virtu Financial has a market cap of $2.2 billion and an enterprise value of -$336 million. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 18 and a forward price-to-earnings of 13.8. Its estimated growth rate for this year is -28.9%, and for next year it's pegged at 17.7%. This is a cash-rich company, since the total cash position on its balance sheet is $1.98 billion and its total debt is $1.03 billion. This stock currently sports a dividend yield of 6%.

A director just bought 100,000 shares, or about $1.59 million worth of stock, at $15.83 to $15.99 per share. That same director also just bought 61,687 shares, or about $983,000 worth of stock, at $15.94 to $16 per share.

From a technical perspective, Virtu Financial is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong over the last two months, with shares ripping higher off its low of $12.13 a share to its recent high of $16.40 a share. During that uptrend, shares of Virtu Financial have been consistently making higher lows and higher highs, which is bullish technical price action. That strong uptrend 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 Virtu Financial, then I would look for long-biased trades as long as this stock is trending above its 20-day moving average of $14.84 a share or above its 50-day moving average of $13.87 a share and then once it breaks out above its 200-day moving average of $16.72 to around $17 a share with volume that hits near or above its three-month average action of 405,366 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 $17.50 to $18, or even $20 to $21 a share.

Infinity Pharmaceuticals

One drug discovery and development player that insiders are jumping into here is Infinity Pharmaceuticals (INFI) , which discovers, develops, and delivers medicines to patients with difficult-to-treat diseases. Insiders are buying this stock into modest strength, since shares are up 6% over the last six months.

Infinity Pharmaceuticals has a market cap of $69 million and an enterprise value of -$43.6 million. This stock trades at a reasonable valuation, with a price-to-sales of 2.47 and a price-to-book of 0.67. Its estimated growth rate for this year is 72.9%, and for next year it's pegged at -95.8%. This is a cash-rich company, since the total cash position on its balance sheet is $112.30 million and its total debt is zero.

A beneficial owner just bought 654,921 shares, or about $855,000 worth of stock, at $1.28 to $1.35 per share.

From a technical perspective, Infinity Pharmaceuticals is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock recently formed a double bottom chart pattern, after shares found some buying interest at $1.11 to $1.15 a share over the last month or so. Following that potential bottom, this stock has now started to uptrend and move back above both its 50-day and 20-day moving averages with strong upside volume flows.

If you're bullish on Infinity Pharmaceuticals, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $1.27 a share and then once it breaks out above some near-term overhead resistance levels at $1.45 to around $1.50 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 572,995 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 $1.65 to $1.77, or even $1.80 to around $2 a share. Any high-volume move above $2 a share will then give this stock a chance to re-fill some of its previous gap-down-day zone from June that started near $5 a share.

Reata Pharmaceuticals

My final stock with some big insider buying is biopharmaceutical player Reata Pharmaceuticals (RETA) , which focuses on drugs with novel mechanisms of action that modulate regulatory proteins called transcription factors. Insiders are buying this stock into solid strength, since shares have trended up 14.4% over the last six months.

Reata Pharmaceuticals has a market cap of $204 million and an enterprise value of $394 million. This stock trades at a premium valuation, with a price-to-sales of 9.85. Its estimated growth rate for next year is -253.30%. This is a cash-rich company, since the total cash position on its balance sheet is $95.66 million and its total debt is zero.

A beneficial owner just bought 164,753 shares, or about $3.78 million worth of stock, at $22.99 per share.

From a technical perspective, Reata Pharmaceuticals is currently trending below both its 50-day and 20-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 $18.51 a share to its recent high around $25 a share. During that uptrend, shares of Reata Pharmaceuticals 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 above some key overhead resistance levels.

If you're bullish on Reata Pharmaceuticals, then I would look for long-biased trades as long as this stock is trending above some near-term support at $21.03 a share and then once it breaks out above both its 20-day moving average of $23.91 a share and its 50-day moving average of $25.39 a share with volume that hits near or above its three-month average action of 93,781 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 $27 to $28, or even $30 to $35 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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