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.
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. Here's a look five stocks whose insiders have been doing some big buying per SEC filings.
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NuStar Energy L.P.
One energy player that insiders are loading up on here is NuStar Energy L.P. (NS), which is engaged in the terminalling, storage, and marketing of petroleum products, and transportation of petroleum products and anhydrous ammonia primarily in the U.S. and the Netherlands. Insiders are buying this stock into decent strength, since shares are up 20% so far in 2014.
NuStar Energy L.P. has a market cap of $4.7 billion and an enterprise value of $7.4 billion. This stock trades at a fair valuation, with a forward price-to-earnings of 23.68. Its estimated growth rate for this year is 126.6%, and for next year it's pegged at 19.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $49.08 million and its total debt is $2.73 billion. This stock currently sports a dividend yield of 7.2%.
A director just bought 100,000 shares, or about $6.2 million worth of stock, at $61.71 to $62.52 per share.
From a technical perspective, NS is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has just started to bounce modestly higher right above its 200-day moving average of $57.34 a share. That bounce is starting to push shares of NS within range of triggering a near-term breakout trade above some key overhead resistance levels.
If you're bullish on NS, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $58.46 or above its 200-day at $57.34 and then once it breaks out above its 50-day moving average of $62.93 a share to some more near-term overhead resistance levels at $64.73 to $65.75 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 action of 461,414 shares. If that breakout hits soon, then NS will set up to re-test or possibly take out its next major overhead resistance levels $66.52 to its 52-week high at $68.33 a share. Any high-volume move above those levels will then give NS a chance to make a run at $70 a share.
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Theravance
Another biotechnology player that insiders are snapping up a large amount of stock in here is Theravance (THRX), which is a royalty management company, that is focused on developing respiratory products. Insiders are buying this stock into major weakness, since shares have collapsed badly so far in 2014 by 59%.
Theravance has a market cap of $1.6 billion and an enterprise value of $2 billion. This stock trades at a premium valuation, with a price-to-sales of 578.58. Its estimated growth rate for this year is 17.4%, and for next year it's pegged at 92%. This is not a cash-rich company, since the total cash position on its balance sheet is $310.86 million and its total debt is $705.11 million. This stock currently sports a dividend yield of 3.3%.
A beneficial owner just bought 832,456 shares, or around $12.78 million worth of stock, at $15.36 per share.
From a technical perspective, THRX is currently trending well below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last four months, with shares dropping from its high of $31.45 to its new 52-week low of $14.50 a share. During that downtrend, shares of THRX have been making mostly lower highs and lower lows, which is bearish technical price action.
If you're in the bull camp on THRX, then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $14.50 a share and then once it breaks out above some key near-term overhead resistance levels at $16.61 to its 50-day moving average of $17.94 a share and then above more resistance at $18.68 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 824,188 shares. If that breakout triggers soon, then THRX will set up to re-test or possibly take out its next major overhead resistance levels at $21 to $22, or even its 200-day moving average of $23.58 a share.
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World Acceptance
One credit services player that insiders are jumping into big here is World Acceptance (WRLD), which is engaged in small-loan consumer finance business in the U.S. and Mexico. Insiders are buying this stock into notable weakness, since shares have dropped lower by 14.8% so far in 2014.
World Acceptance has a market cap of $734 million and an enterprise value of $1.2 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 7.5 and a forward price-to-earnings of 6.4. Its estimated growth rate for this year is 16.1%, and for next year it's pegged at 9.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $14.63 million and its total debt is $559.70 million.
A director just bought 129,580 shares, or about $9.27 million worth of stock, at $71.44 to $72.08 per share.
From a technical perspective, WRLD is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong over the last few weeks, with shares moving higher from its low of $63.25 to its recent high of $75.20 a share. During that uptrend, shares of WRLD have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of WRLD within range of triggering a near-term breakout trade.
If you're bullish on WRLD, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $70.85 a share and then once it breaks out above some near-term overhead resistance at $75.20 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 volume of 169,386 shares. If that breakout materializes soon, then WRLD will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $79.54 to $84 a share.
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Southern Copper
One copper player that insiders are active in here is Southern Copper (SCCO), which is engaged in the mining, exploring, smelting, and refining copper and other minerals in Peru, Mexico, Argentina, Chile, and Ecuador. Insiders are buying this stock into modest weakness, since shares have dropped by 10.4% over the last three months.
Southern Copper has a market cap of $23.6 billion and an enterprise value of $26.7 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 17.3 and a forward price-to-earnings of 15. Its estimated growth rate for this year is -14.1%, and for next year it's pegged at 15.8 %. This is not a cash-rich company, since the total cash position on its balance sheet is $1.24 billion and its total debt is $4.21 billion. This stock currently sports a dividend yield of 1.7%.
The chairman of the board just bought 550,000 shares, or about $15.63 million worth of stock, at $28.29 to $28.51 per share.
From a technical perspective, SCCO is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double bottom chart pattern at $27.15 to $27.46 a share. Following that bottom, shares of SCCO have started to bounce higher off those support levels and it's now moving within range of triggering a near-term breakout trade above some key overhead resistance levels.
If you're bullish on SCCO, then I would look for long-biased trades as long as this stock is trending above those double bottom support levels and then once it breaks out above some key near-term overhead resistance levels at $29.55 to $30.22 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 action of 1.98 million shares. If that breakout gets underway soon, then SCCO will set up to re-test or possibly take out its next major overhead resistance levels at $32.50 to $33 a share, or even $34 a share.
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Huntsman
One final stock with some large insider buying is Huntsman (HUN), which manufactures and sells differentiated organic and inorganic chemical products worldwide. Insiders are buying this stock into modest weakness, since shares have traded off by 7.9% over the last three months.
Huntsman has a market cap of $6 billion and an enterprise value of $9.6 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 15 and a forward price-to-earnings of 8.8. Its estimated growth rate for this year is 30.4%, and for next year it's pegged at 30.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $582 million and its total debt is $4.04 billion. This stock currently sports a dividend yield of 2.1%.
A director just bought 450,000 shares, or about $10.79 million worth of stock, at $23.99 per share. From a technical perspective, HUN is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently collapsed hard over the last two months, from its high of $29.20 to its new 52-week low of $20.35 a share. Since that plunge, shares of HUN have started to rebound off that $20.35 low and it's now trending within range of triggering a near-term breakout trade.
If you're bullish on HUN, then I would look for long-biased trades as long as this stock is trending above some near-term support at $22.82 and then once it breaks out above some key near-term overhead resistance levels at $25.16 to its 200-day at $25.37 and its 50-day at $25.55 a share and then above more resistance at $25.93 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 3.52 million shares. If that breakout kicks off soon, then HUN will set up to re-test or possibly take out its next major overhead resistance levels at $27.50 to its 52-week high at $29.33 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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