DELAFIELD, Wis. (Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.
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, 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.
Akamai Technologies
One technology player that insiders are in love with here is Akamai Technologies (AKAM), which provides content delivery and cloud infrastructure services for accelerating and improving the delivery of content and applications over the Internet in the United States and internationally. Insiders are buying this stock into decent strength, since shares are up by 10.5% so far in 2013.
Akamai Technologies has a market cap of $8 billion and an enterprise value of $7.6 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 29.25 and a forward price-to-earnings of 20.85. Its estimated growth rate for this year is 24.4%, and for next year it's pegged at 8%. This is a cash-rich company, since the total cash position on its balance sheet is $566.32 million and its total debt is zero.
The CEO just bought 25,000 shares, or about $1.13 million worth of stock, at $45.28 per share.
From a technical perspective, AKAM is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been trending sideways for the last month and change, with shares moving between $43.81 on the downside and $46.85 on the upside. Shares of AKAM are now started to bounce off its 200-day and it's quickly moving within range of triggering a big breakout trade above the upper-end of its recent sideways trading chart pattern.
If you're bullish on AKAM, then I would look for long-biased trades as long as this stock is trending above its recent low of $43.81, and then once breaks out above some near-term overhead resistance levels at $46.55 to $46.85 a share and then once it clears its 50-day at $47.28 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 2.24 million shares. If that breakout hits soon, then AKAM will set up to re-fill some of its previous gap down zone from October that started at $53 a share.
Ubiquiti Networks
Another technology stock that insiders are active in here is Ubiquiti Networks (UBNT), which develops high-performance networking technology for service providers and enterprises. Insiders are buying this stock into big time strength, since shares are up a whopping 211% so far in 2013.
Ubiquiti Networks has a market cap of $3.3 billion and an enterprise value of $3.4 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 31.65 and a forward price-to-earnings of 18.48. Its estimated growth rate for this year is 100%, and for next year it's pegged at 13.2%. This is a cash-rich company, since the total cash position on its balance sheet is $279.73 million and its total debt is $74.89 million.
A director just bought 20,000 shares, or about $737,000 worth of stock, at $36.85 per share.
From a technical perspective, UBNT is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been trending sideways for the last month and change, with shares moving between $36.30 on the downside and $44.80 on the upside. Traders should keep an eye on shares of UBNT for any high-volume move above the upper-end of its recent range, since that could trigger a big breakout for this stock.
If you're in the bull camp on UBNT, then I would look for long-biased trades as long as this stock is trending above some near-term support at $36.30 and then once it breaks out above some near-term overhead resistance levels at $39.35 to $40.59 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 905,311 shares. If that breakout triggers soon, then UBNT will set up to re-test or possibly take out its all-time high at $44.80 a share. Any high-volume move above $44.80 will then give UBNT a chance to tag $50 to $55 a share.
InnerWorkings
Another stock that insiders are loading up on here is InnerWorkings (INWK), which is a provider of managed print and promotional procurement solutions to corporate clients across a range of industries. Insiders are buying this stock into significant weakness, since shares are off by 49% so far in 2013.
InnerWorkings has a market cap of $357 million and an enterprise value of $425 million. This stock trades at a fair valuation, with a trailing price-to-earnings of 23.20 and a forward price-to-earnings of 23.20. Its estimated growth rate for this year is -75.6%, and for next year it's pegged at 200%. This is not a cash-rich company, since the total cash position on its balance sheet is $19.22 million and its total debt is $91.50 million.
A beneficial owner just bought 32,000 shares, or about $214,000 worth of stock, at $6.69 to per share. That same beneficial owner also just bought 108,700 shares, or about $727,000 worth of stock, at $6.69 to $6.70 per share.
From a technical perspective, INWK is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock gapped down sharply in November from $9.75 to $5.54 a share with heavy downside volume. Following that gap down, shares of INWK have reversed its bearish trend and entered an uptrend, with the stock moving higher from its low of $5.54 to $7.21 a share. That move has now pushed shares of INWK within range of triggering a major breakout trade.
If you're bullish on INWK, then I would look for long-biased trades as long as this stock is trending above some key near-term support at $6.42 and then once it breaks out above some near-term overhead resistance levels at $7.07 to $7.21 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 530,297 shares. If that breakout hits soon, then INWK will set up to re-fill some of its previous gap down zone from November that started at $9.75 a share.
Seattle Genetics
One biotechnology player that insiders are snapping up a huge amount of stock in here is Seattle Genetics (SGEN), which develops and commercializes monoclonal antibody-based therapies for the treatment of cancer and autoimmune disease. Insiders are buying this stock into huge strength, since shares are up sharply by 72% so far in 2013.
Seattle Genetics has a market cap of $4.9 billion and an enterprise value of $4.5 billion. This stock trades at a premium valuation, with a price-to-sales of 19.09 and a price-to-book of 21.65. Its estimated growth rate for this year is -37%, and for next year it's pegged at -6.3%. This is a cash-rich company, since the total cash position on its balance sheet is $373.85 million and its total debt is zero.
A director just bought 1,005,901 shares, or about $43.44 million worth of stock, at $42.31 to $43.98 per share.
From a technical perspective, SGEN is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been downtrending over the last few weeks, with shares dropping from its high of $45.37 to its intraday low of $39.85 a share. During that move, shares of SGEN have been consistently making lower highs and lower lows, which is bearish technical price action.
If you're bullish on SGEN, then I would look for long-biased trades as long as this stock is trending above its 200-day of $38.40 or above more near-term support at $36.79 and then once it takes out its 50-day at $41.02 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 856,995 shares. If we get that move soon, then SGEN will set up to re-test or possibly take out its next major overhead resistance levels at $45.37 $46.48 a share. Any high-volume move above those levels will then give SGEN a chance to tag its 52-week high at $49.23 a share.
Western Gas
One final name with some big insider buying is Western Gas (WES), which is engaged in gathering, compressing, processing, treating and transporting natural gas, condensate, natural gas liquids and crude oil. Insiders are buying this stock into notable strength, since shares are up by 27% so far in 2013.
Western Gas has a market cap of $6.8 billion and an enterprise value of $8.5 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 58.23 and a forward price-to-earnings of 26.16. Its estimated growth rate for this year is 102.4, and for next year it's pegged at 36.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $38.36 million and its total debt is $1.52 billion. This stock currently sports a dividend yield of 3.7%.
A director just bought 100,000 shares, or $6.15 million worth of stock, at $61.51 per share.
From a technical perspective, WES is currently trending above both is 50-day and 200-day moving averages, which is bullish. This stock recently gapped down from its high of $64.07 to $59.27 a share with heavy downside volume. Following that gap down, shares of WES have started to rebound higher off that $59.27 low and it's quickly moving within range of triggering a near-term breakout trade.
If you're bullish on WES, then look for long-biased trades as long as this stock is trending above its recent low of $59.27 and then once it breaks out above some near-term overhead resistance at $61 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 236,645 shares. If that breakout triggers soon, then WES will set up to re-fill some of its previous gap down zone that started at $64.07 a share. Any high-volume move above that level will then give WES a chance to tag $70 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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