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.
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.
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At the end of the day, its 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 it's 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. Here's a look at five stocks whose insiders have been doing some big buying per SEC filings.
International Speedway
One stock that insiders are loading up on here is International Speedway (ISCA), an owner of major motorsports entertainment facilities and promoter of motorsports themed entertainment activities in the U.S. Insiders are buying this stock into weakness, since shares are off 10% during the last three months.
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International Speedway has a market cap of $1.42 billion and an enterprise value of $1.52 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 26.89 and a forward price-to-earnings of 19.72. Its estimated growth rate for this year is -4%, and for next year it's pegged at 6.9%. This is not a cash-rich company, since the total cash position on its balance sheet is $163.37 million and its total debt is $276.48 million.
The CEO just bough 7,000 shares, or about $233,000 worth of stock, at $33.25 a share. The president also just bough 7,000 shares, or about $233,000 worth of stock, at $33.25 a share.
From a technical perspective, ISCA is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently spiked lower from its high of $33.58 to its low of $30.14 a share. During that move, shares of ISCA have been consistently making lower highs and lower lows, which is bearish technical price action.
If you're bullish on ISCA, then I would look for long-biased trades as long as this stock is trending above both its 200-day at $31.88 and its 50-day at $32.22 and then once it breaks out above some near-term overhead resistance at $33.58 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 122,071 shares. If we get that move soon, then ISCA will set up to re-test or possibly take out its next major overhead resistance levels at $34.90 to its 52-week high at $35.77 a share.
ChemoCentryx
Another biopharmaceutical player that insiders love here is ChemoCentryx (CCXI), which is engaged in discovering, developing and commercializing orally-administered therapeutics to treat autoimmune diseases, inflammatory disorders and cancer. Insiders are buying this stock into big time weakness, since shares are off sharply by 51% in 2013.
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ChemoCentryx has a market cap of $226.59 million and an enterprise value of $96.59 million. This stock trades at a premium valuation, with a price-to-sales of 32.64 and a price-to-book of 1.44. Its estimated growth rate for this year is 8.8%, and for next year it's pegged at -16.5%. This is a cash-rich company, since the total cash position on its balance sheet is $129.77 million and its total debt is just $618,000.
A beneficial owner just bought 109,425 shares, or about $601,000 worth of stock, at $5.49 per share.
From a technical perspective, CCXI is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last three months, with shares plunging lower from its high of $14.75 to its recent low of $5.10 a share. During that downtrend, shares of CCXI have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of CCXI have now moved into oversold territory, since its current relative strength index reading is 24.98. Oversold can always get more oversold, but it's also an area where a stock can experience a powerful bounce higher from.
If you're in the bull camp on CCXI, then look for long-biased trades as long as this stock is trending above its recent low of $5.10 and then once it breaks out above some near-term overhead resistance at $5.90 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 439,942 shares. If that breakout triggers soon, then CCXI will set up to re-test or possibly take out its next major overhead resistance levels at $6.45 to $7 a share. Any high-volume move above $7 will then give CCXI a chance to re-fill some of its previous gap down zone from September that started at $8.46 a share.
Achillion Pharmaceuticals
One biopharmaceutical player that insiders are jumping into big here is Achillion Pharmaceuticals (ACHN), which focuses on the discovery, development and commercialization of innovative treatments for infectious diseases. Insiders are buying this stock into massive weakness, since shares are off sharply by 67% so far in 2013.
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Achillion Pharmaceuticals has a market cap of $246.43 million and an enterprise value of $136.34 million. This stock trades at a premium valuation, with a price-to-sales of 2,244 and a price-to-book of 1.50. Its estimated growth rate for this year is -14.1%, and for next year it's pegged at -15.1%. This is a cash-rich company, since the total cash position on its balance sheet is $133.82 million and its total debt is just $525,000.
A beneficial owner just bought 2.8 million shares, or about $8.35 million worth of stock, at $2.96 to $3.01 per share.
From a technical perspective, ACHN is currently trending just below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down sharply from around $7.50 to below $3 a share with heavy downside volume. Following that gap down, shares of ACHN have continued to trend lower with the stock printing a new 52-week low today. This move has pushed shares of ACHN into extremely oversold territory, since its current relative strength index reading is 18.08. Oversold can always get more oversold, but it's also an area where a stock can bounce sharply higher from if the buyers step back in.
If you're bullish on ACHN, then look for long-biased trades as long as this stock is trending above $2.50 and then once it breaks out above some near-term overhead resistance levels at $2.85 to $3 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 2.10 million shares. If that breakout triggers soon, then ACHN will set up to re-test or possibly take out its gap down day high of $3.62 a share.
Bridge Bancorp
One banking player that insiders are snapping up a solid amount of stock in here is Bridge Bancorp (BDGE), which provides commercial and consumer banking business, including saving and deposits from the consumers, commercial and real estate loans and homey equity loans. Insiders are buying this stock into modest strength, since shares are up 6.4% so far in 2013.
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Bridge Bancorp has a market cap of $193 million and an enterprise value of $289.60 million. This stock trades at a fair valuation, with a trailing price-to-earnings of 14.75 and a forward price-to-earnings of 13.97. Its estimated growth rate for this year is 12.5%, and for next year it's pegged at 7.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $40.82 million and its total debt is $137.91 million. This stock currently sports a dividend yield of 4.2%.
The CEO just bought 10,000 shares, or about $207,000 worth of stock, at $20.75 per share. A director also just bought 10,000 shares, or about $207,000 worth of stock, at $20.75 per share.
From a technical perspective, BDGE is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending sideways inside of a consolidation pattern for the last two months, with shares moving between $20.60 on the downside and $22.24 on the upside. Shares of BDGE have recently crossed back above both its 50-day and 200-day moving averages. That move is quickly pushing shares of BDGE within range of triggering a breakout trade above the upper-end of its recent range.
If you're bullish on BDGE, then look for long-biased trades as long as this stock is trending above some key near-term support levels at $21 or at $20.60 and then once it breaks out above some near-term overhead resistance at $22.24 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 volume of 30,922 shares. If that breakout hits, then BDGE will set up to re-test or possibly take out its 52-week high at $24.99 a share.
Lionbridge Technologies
One final name with decent insider buying is Lionbridge Technologies (LIOX), which provides a suite of language, content and testing solutions. Insiders are buying this stock into modest weakness, since shares are off 8.9% so far in 2013.
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Lionbridge Technologies has a market cap of $222.16 million and an enterprise value of $230.70 million. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 28.29 and a forward price-to-earnings of 14.60. Its estimated growth rate for this year is -63.2%, and for next year it's pegged at 257.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $17.64 million and its total debt is $26.70 million.
A beneficial owner just bought 175,000 shares, or about $654,000 worth of stock, at $3.73 to $2.32 per share.
From a technical perspective, LIOX is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending for the last five months, with shares moving higher from its low of $2.16 to its recent high of $3.89 a share. During that uptrend, shares of LIOX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of LIOX within range of triggering a major breakout trade.
If you're bullish on LIOX, then look for long-biased trades as long as this stock is trending above some key near-term support levels at $3.46 or at $3.20 and then once it breaks out above some near-term overhead resistance levels at $3.80 to $3.89 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 208,575 shares. If that breakout triggers soon, then LIOX will set up to re-test or possibly take out its 52-week high at $4.25 a share. Any high-volume move above $4.25 will then give LIOX a chance to tag $5 to $6 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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