DELAFIELD, Wis. (Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.
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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.
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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 large 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.
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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. Here's a look five stocks whose insiders have been doing some big buying per SEC filings.
Accelerate Diagnostics
One health care player that insiders are active in here is Accelerate Diagnostics (AXDX), which focuses on developing and commercializing instrumentation for the rapid identification and antibiotic susceptibility testing of infectious pathogens. Insiders are buying this stock into major strength, since shares are higher by 67% so far in 2014.
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Accelerate Diagnostics has a market cap of $857 million and an enterprise value of $820 million. This stock trades at a premium valuation, with a price-to-book of 22.14. This is a cash-rich company, since the total cash position on its balance sheet is $38.56 million and its total debt is just $267,000.
A director just bought 20,000 shares, or about $397,000 worth of stock, at $19.89 per share. A beneficial owner also just bought 20,000 shares, or about $430,000 worth of stock, at $19.96 per share.
From a technical perspective, AXDX is currently trending above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock recently fell sharply from $31.86 to its low of $18.71 a share. During that drop, shares of AXDX have been consistently making lower highs and lower lows, which is bearish technical price action. That said shares of AXDX have started to bounce off that $18.71 low and it's now starting to trend within range of triggering a near-term breakout trade.
If you're bullish on AXDX, then I would look for long-biased trades as long as this stock is trending above its recent low of $18.71 or above its 200-day at $17.25 and then once breaks out above some near-term overhead resistance at $21.42 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 219,627 shares. If that breakout starts soon, then AXDX will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $24.31 to $26 a share.
Colfax
A diversified machinery player that insiders are jumping into here is Colfax (CFX), which provides gas-and fluid-handling and fabrication technology products and services to commercial and governmental customers worldwide. Insiders are buying this stock into modest strength, since shares are up 8% so far in 2014.
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Colfax has a market cap of $8.5 billion and an enterprise value of $9 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 45 and a forward price-to-earnings of 22. Its estimated growth rate for this year is 12.7%, and for next year it's pegged at 32.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $482.18 million and its total debt is $1.15 billion.
A director just bought 7,447 shares, or about $500,000 worth of stock, at $31.59 per share.
From a technical perspective, CFX is currently trending above its 200-day moving average and well below its 50-day moving average, which is neutral trendwise. This stock is starting to bounce higher right off its 200-day moving average and it's quickly moving within range of triggering a major breakout trade that could push the stock into a previous gap-down-day zone.
If you're in the bull camp on CFX, then I would look for long-biased trades as long as this stock is trending above its 200-day at $66.41 or above more near-term support at $65.72 and then once it breaks out above some near-term overhead resistance levels at $69 to $70 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 544,194 shares. If that breakout begins soon, then CFX will set up to re-fill some of its previous gap-down-day zone from earlier this month that started at $73 a share.
Alcoa
One basic materials player that insiders are active in here is Alcoa (AA), which produces and manages primary aluminum, fabricated aluminum, and alumina. Insiders are buying this stock into major strength, since shares are up sharply by 41% so far in 2014.
Alcoa has a market cap of $20 billion and an enterprise value of $26 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 21. Its estimated growth rate for this year is 78.8%, and for next year it's pegged at 37.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.18 billion and its total debt is $8.06 billion. This stock currently sports a dividend yield of 0.80%.
A director just bought 30,120 shares, or about $498,000 worth of stock, at $16.54 per share.
From a technical perspective, AA is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last six months, with shares moving higher from its low of $10.81 to its intraday high of $17.22 a share. During that uptrend, shares of AA have been consistently making higher lows and higher highs, which is bullish technical price action. That said, shares of AA have now entered overbought territory, since the stock has a relative strength index reading of 77.
If you're bullish on AA, then you might be best served waiting for this stock to pull back off overbought levels. Bulls can look to buy AA off weakness on a pullback back towards its 50-day moving average of $14.61 a share.
Blue Capital Reinsurance
One financial player that insiders are jumping into here is Blue Capital Reinsurance (BCRH), which offers collateralized reinsurance in the property catastrophe market. Insiders are buying this stock into notable strength, since shares are up by 13% over the last six months.
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Blue Capital Reinsurance has a market cap of $174 million and an enterprise value of $43 million. This stock trades at cheap valuation, with a forward price-to-earnings of 8.6. Its estimated growth rate for this year is 822.6%, and for next year it's pegged at 2.7%. This is a cash-rich company, since the total cash position on its balance sheet is $129.40 million and its total debt is zero. This stock currently sports a dividend yield of 6.4%.
A beneficial owner just bought 38,200 shares, or about $760,000 worth of stock, at $19.90 to $19.93 per share. That same beneficial owner also just bought 23,500 shares, or about $464,648 worth of stock, at $19.71 per share.
From a technical perspective, BCRH is currently trending above its 50-day moving average, which is bullish. This stock has been uptrending strong for the last two months, with shares moving higher from its low of $17.15 to its recent high of $20.05 a share. During that move, shares of BCRH have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of BCRH within range of triggering a big breakout trade.
If you're bullish on BCRH, then I would look for long-biased trades as long as this stock is trending above its 50-day at $18.35 and then once it breaks out above some near-term overhead resistance levels at $20.05 to its all-time high at $21.02 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 action of 55,887 shares. If that breakout hits soon, then BCRH will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $25 to $30 a share.
Synergy Resources
One final stock with some decent insider buying is Synergy Resources (SYRG), which acquires, explores, develops, produces and exploits crude oil and natural gas properties primarily located in the Wattenberg field in Denver-Julesburg Basin in northeast Colorado. Insiders are buying this stock into big strength, since shares are up sharply by 29% so far in 2014.
Synergy Resources has a market cap of $931 million and an enterprise value of $918 million. This stock trades at a cheap valuation, with a trailing price-to-earnings of 52 and a forward price-to-earnings of 15. Its estimated growth rate for this year is 111.10%, and for next year it's pegged at 107.90%. This is barley a cash-rich company, since the total cash position on its balance sheet is $47.98 million and its total debt is $37 million.
A director just bought 20,000 shares, or about $241,000 worth of stock, at $12.05 per share.
From a technical perspective, SYRG is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently found some buying interest right around $11.75 to $11.60 a share. Shares of SYRG are now starting to bounce higher off those support levels and it's starting to trend back above its 50-day moving average. That move is quickly pushing shares of SYRG within range of triggering a major breakout trade.
If you're bullish on SYRG, then look for long-biased trades as long as this stock is trending above some near-term support levels at $11.60 to $11.50 and then once it breaks out above some near-term overhead resistance levels at $12.73 to its 52-week high at $14.11 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 845,800 shares. If that breakout gets underway soon, then SYRG will set up to enter new 52-week-high territory above $14.11 a share, which is bullish technical price action. Some possible upside targets off that move are $17 to $18 a share.
To see more stocks with notable insider buying, check out the Stocks With Big Insider Buying portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.
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At the time of publication, author had no positions in stocks mentioned.
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.
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