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.
Ameresco
One industrial goods player that insiders are jumping into here is Ameresco (AMRC), which provides energy efficiency solutions for facilities in the U.S., Canada and Europe. Insiders are buying this stock into notable weakness, since shares are down by 19% so far in 2014.
Ameresco has a market cap of $355 million and an enterprise value of $443 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 154 and a forward price-to-earnings of 27.50. Its estimated growth rate for this year is 260%, and for next year it's pegged at 55.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $17.17 million and its total debt is $116.20 million.
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The CEO just bought 65,470 shares, or about $491,000 worth of stock, at $7.50 per share. That same CEO also just bought 166,130 shares, or about $1.28 million worth of stock, at $7.75 per share.
From a technical perspective, AMRC is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down sharply from around $9.75 to $8 a share with heavy downside volume. This stock has continued to trend lower following that gap with shares hitting a recent low of $7.41 a share. That move has pushed shares of AMRC into oversold territory, since its current relative strength index reading is 27.27. Oversold can always get more oversold, but it's also an area where a stock can make a powerful bounce higher from.
If you're bullish on AMRC, then I would look for long-biased trades as long as this stock is trending above its recent low of $7.41 and then once breaks out above some near-term overhead resistance levels at $7.88 to $8.25 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 126,932 shares. If that breakout gets underway soon, then AMRC will set up to re-fill some of its previous gap-down-day zone that started at $9.75 a share.
Visa
Another credit services player that insiders are active in here is Visa (V), which is a payments technology company, operates as a retail electronic payments network worldwide. Insiders are buying this stock into decent strength, since shares are up 16% over the last six months.
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Visa has a market cap of $143 billion and an enterprise value of $135 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 28.79 and a forward price-to-earnings of 21.72. Its estimated growth rate for this year 17%, and for next year it's pegged at 17.2%. This is a cash-rich company, since the total cash position on its balance sheet is $4.09 billion and its total debt is zero. This stock currently sports a dividend yield of 0.70%.
A director just bought 1,575 shares, or about $350,000 worth of stock, at $222.70 per share.
From a technical perspective, V is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently formed a double bottom chart pattern at $219.59 to $218.56 a share. Following that bottom, shares of V have spiked higher back above its 50-day moving average of $222.94 a share That spike is starting to push shares of V within range of triggering a big breakout trade.
If you're in the bull camp on V, then I would look for long-biased trades as long as this stock is trending above its 50-day at $222.94 or above support at $218.56 and then once it breaks out above some near-term overhead resistance levels at $228.39 to $228.48 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 3.06 million shares. If that breakout materializes soon, then V will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $235.08 a share.
MDC Partners
One advertising and marketing player that insiders are warming up to here is MDC Partners (MDCA), which provides marketing, activation and communications and marketing solutions and services worldwide. Insiders are buying this stock into solid strength, since shares are up 37% over the last six months.
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MDC Partners has a market cap of $1.17 billion and an enterprise value of $1.63 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 27.61. Its estimated growth rate for this year is 129.4%, and for next year it's pegged at 35.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $102.01 million and its total debt is $665.13 million. This stock currently sports a dividend yield of 3.4%.
The CEO just bought 30,000 shares, or about $636,000 worth of stock, at $21.48 per share. The vice president also just bought 10,000 shares, or about $214,000 worth of stock, at $21.22 per share.
From a technical perspective, MDCA is currently trending above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock has been uptrending over the last few weeks, with shares moving higher from its low of $20.55 to its recent high of $23.37 a share. During that move, shares of MDCA have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of MDCA within range of triggering a near-term breakout trade.
If you're bullish on MDCA, then I would look for long-biased trades as long as this stock is trending above support at $22 or at $21 and then once it breaks out above some near-term overhead resistance levels at $23.37 to its 50-day moving average of $23.90 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 218,542 shares. If that breakout kicks off soon, then MDCA will set up to re-test or possibly take out its next major overhead resistance levels $25.99 to its 52-week high at $26.62 a share.
Ladenburg Thalmann Financial Services
One financial player that insiders are loading up on here is Ladenburg Thalmann Financial Services (LTS), which provides brokerage and advisory, investment banking, equity research, institutional sales and trading, asset management and trust services. Insiders are buying this stock into major strength, since shares are up 80% over the last six months.
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Ladenburg Thalmann Financial Services has a market cap of $573 million and an enterprise value of $553 million. This stock trades at reasonable valuation, with a price-to-sales of 0.73 and a price-to-book of 2.94. Its estimated growth rate for this year is 200%. This is not a cash-rich company, since the total cash position on its balance sheet is $55.12 million and its total debt is $64.65 million.
A director just bought 100,000 shares, or about $298.430 worth of stock, at $2.98 per share.
From a technical perspective, LTS 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 two months, with shares moving higher from its low of $2.32 to its intraday high of $3.20 a share. During that uptrend, shares of LTS have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of LTS within range of triggering a big breakout trade.
If you're bullish on LTS, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average at $2.76 or above more support at $2.68 and then once it breaks out above some key overhead resistance levels at $3.31 a share to its 52-week high at $3.54 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 346,440 shares. If that breakout hits soon, then LTS will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $4 to $4.50 a share, or even $5 a share.
Dresser-Rand
One final stock with some large insider buying is Dresser-Rand (DRC), which designs, manufactures, sells and services rotating equipment solutions to the oil, gas, chemical, petrochemical, process, power generation, military and other industries worldwide. Insiders are buying this stock into modest weakness, since shares are off by 11% over the last six months.
Dresser-Rand has a market cap of $4.2 billion and an enterprise value of $5.2 billion This stock trades at a reasonable valuation, with a trailing price-to-earnings of 25.57 and a forward price-to-earnings of 17.07. Its estimated growth rate for this year is 10.7%, and for next year it's pegged at 21.9%. This is not a cash-rich company, since the total cash position on its balance sheet is $190.40 million and its total debt is $1.29 billion.
The CEO just bought 18,400 shares, or about $1 million worth of stock, at $54.75 per share.
From a technical perspective, DRC is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped up sharply from around $54 to $59.70 a share with strong volume. Following that gap, shares of DRC sold off and filled that gap back to it its recent low of $54.10 a share. Shares of DRC have now started to bounce off that $54.10 low and it's starting to move within range of triggering a near-term breakout trade.
If you're bullish on DRC, then look for long-biased trades as long as this stock is trending above key support at $54 and then once it breaks out above some near-term overhead resistance at $56.39 to its 50-day moving average at $56.93 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 action of 1.03 million shares. If that breakout triggers soon, then DRC will set up to re-test or possibly take out its next major overhead resistance levels at $59 to its 200-day moving average of $59.72 a share. Any high-volume move above its 200-day and $60.50 will then give DRC a chance to tag $63 to $64 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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