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 it's 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.
Biolase
One stock that insiders are loading up on here is Biolase (BIOL), which develops, manufactures and markets lasers in dentistry and medicine in the U.S. and internationally. Insiders are buying this stock into big time strength, since shares are up sharply by 79% over the last three months.
Biolase has a market cap of $99 million and an enterprise value of $100 million. This stock trades at a reasonable valuation, with a price-to-sales of 1.67 and a price-to-book of 10.74. Its estimated growth rate for this year is -230%, and for next year it's pegged at 69.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $4.15 million and its total debt is $5.53 million.
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A beneficial owner just bought 2,035,033 shares, or about $5.23 million worth of stock, at $2.53 to $2.59 per share.
From a technical perspective, BIOL is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending a bit over the last few weeks, with shares moving higher from its low of $2.21 to its recent high of $2.94 a share. During that uptrend, shares of BIOL have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of BIOL within range of triggering a big breakout trade.
If you're bullish on BIOL, then I would look for long-biased trades as long as this stock is trending above its 50-day at $2.49 and then once breaks out above some near-term overhead resistance levels at $2.94 to $3.28 a share and then above $3.55 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 487,464 shares. If that breakout hits soon, then BIOL will set up to re-test or possibly take out its next major overhead resistance levels at $4.11 to $4.50 a share.
Spark Networks
Another stock player that insiders are warming up to here is Spark Networks (LOV), which provides online personals services in the U.S. and internationally. Insiders are buying this stock into notable weakness, since shares are off by 14% over the last six months.
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Spark Networks has a market cap of $140 million and an enterprise value of $117 million. This stock trades at a fair valuation, with a price-to-sales of 2.05 and a price-to-book of 7.76. Its estimated growth rate for this year is 25%, and for next year it's pegged at 48.1%. This is a cash-rich company, since the total cash position on its balance sheet is $17.24 million and its total debt is zero.
A beneficial owner just bought 73,588 shares, or about $415,000 worth of stock, at $5.65 per share.
From a technical perspective, LOV 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 moving lower from its high of $6.56 to its recent low of $5.53 a share. During that downtrend, shares of LOV have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of LOV have now started to bounce off that $5.53 low and it's starting to move within range of triggering a near-term breakout trade.
If you're in the bull camp on LOV, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $5.53 to $5.30 and then once it breaks out above its 50-day moving average of $5.96 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 188,243 shares. If that breakout hits soon, then LOV will set up to re-test or possibly take out its next major overhead resistance levels at $6.50 to $7.30 a share.
Shutterfly
One personal services player that insiders are jumping into here is Shutterfly (SFLY), which is engaged in the manufacture and retail of digital personalized products and services in the U.S. Insiders are buying this stock into modest weakness, since shares are off by 6% so far in 2014.
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Shutterfly has a market cap of $1.8 billion and an enterprise value of $1.5 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 197.94 and a forward price-to-earnings of 153.25. Its estimated growth rate for this year is -245.8%, and for next year it's pegged at 188.60%. This is a cash-rich company, since the total cash position on its balance sheet is $499.08 million and its total debt is $243.49 million. After you back out the debt, Shutterfly has a total of $255.59 million of cash on its books.
A director just bought 15,000 shares, or about $670,000 worth of stock, at $44.71 per share.
From a technical perspective, SFLY is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has recently crossed back above its 50-day moving average of $47.29 a share. That move is quickly pushing shares of SFLY within range of triggering a near-term breakout trade.
If you're bullish on SFLY, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $46 or at $45 and then once it breaks out above some near-term overhead resistance levels at $48.39 to $50.16 a share and then above $52 to $52.50 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 913,512 shares. If that breakout hits soon, then SFLY will set up to re-test or possibly take out its next major overhead resistance levels at $58 to $60 a share.
Theravance
One biopharmaceutical player that insiders are loading up on here is Theravance (THRX), which engages in the discovery, development, and commercialization of small molecule medicines primarily for therapeutic areas of respiratory diseases, bacterial infections and central nervous system pain. Insiders are buying this stock into strength, since shares are up by 11% so far in 2014.
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Theravance has a market cap of $4.3 billion and an enterprise value of $4 billion. This stock trades at a premium valuation, with a forward price-to-earnings of 129.42. Its estimated growth rate for this year is 26.9%, and for next year it's pegged at 125.4%. This is a cash-rich company, since the total cash position on its balance sheet is $520.50 million and its total debt is $287.50 million. After you back out the debt, Theravance has a total of $233 million of cash on its books.
A beneficial owner just bought 342,229 shares, or about $12.85 million worth of stock, at $37.55 per share.
From a technical perspective, THRX is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong over the last few weeks, with shares moving higher from its low of $34.50 to its recent high of $40.65 a share. During that uptrend, shares of THRX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of THRX within range of triggering a big breakout trade.
If you're bullish on THRX, then I would look for long-biased trades as long as this stock is trending above its 50-day at $36.82 and then once it breaks out above some key overhead resistance levels at $40.65 to its 52-week high at $42.96 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 947,556 shares. If that breakout hits soon, then THRX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $50 to $55 a share.
Robert Half International
One final stock with some notable insider buying is Robert Half International (RHI), which provides staffing and risk consulting services in North America, South America, Europe, Asia and Australia. Insiders are buying this stock into modest strength, since shares are up by around 9% over the last six months.
Robert Half International has a market cap of $5.5 billion and an enterprise value of $5.2 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 22.50 and a forward price-to-earnings of 17.41. Its estimated growth rate for this year is 13.1%, and for next year it's pegged at 14.5%. This is a cash-rich company, since the total cash position on its balance sheet is $279.75 million and its total debt is just $1.46 million. This stock currently sports a dividend yield of 1.8%.
A director just bought 19,768 shares, or about $793,000 worth of stock, at $40.12 per share.
From a technical perspective, RHI is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently crossed back above its 50-day moving average of $40.85 a share. That move is starting to push shares of RHI within range of triggering a big breakout trade.
If you're bullish on RHI, then look for long-biased trades as long as this stock is trending above some near-term support levels at $39.50 to $38.50 and then once it breaks out above some near-term overhead resistance levels at $42.32 a share to its 52-week high at $43.06 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 1.16 million shares. If that breakout triggers soon, then RHI will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $50 to $55 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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