Insider buying and selling can often be a tell for the future movements of a stock price. When a stock has been beaten down and you start to see insider buying, it could mean that those who know most about their company are finding value in the share price. Insider selling can also mean that corporate insiders think their shares are overvalued, or it could simply be profit-taking. Regardless, it's a good idea to monitor insider activity in any stock you know.
According to this Bloomberg report, insider buying and selling for the week ending Oct. 22 saw some very large activity on both sides of the trade. The insider selling still made up the bulk of the action, but we did also see some significant buying by corporate insiders.
Here's a look at the top 20 stocks with the largest amount of insider buying and selling.
The large selling at two tech companies that has been persistent for weeks continued to show up in the most recent filings. Insiders at Google (GOOG) sold 189,843 shares, or $113.7 million worth of stock, at an average price of $598.81. Clearly, the insiders at Google are taking advantage of the stock’s strength with shares only 13 points off its 52-week high of $629.51. However, this persistent heavy selling is starting to become a big of a red flag. All of this pressure could lead to some weakness in the near term, considering that the selling has not let up.
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Insiders at Oracle (ORCL) dumped 3.5 million shares, or $100.6 million worth of stock, at an average share price of $28.93. Oracle CEO Lawrence Ellison continues to be the insider at the company who’s dumping a lot of stock onto the open market. It looks like Oracle has technically put in a near-term top at around $29 a share. Investors might want to watch for a pullback in this name toward $26.50.
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New names that showed up in the large insider selling list include specialty pharmaceutical company Valeant Pharmaceuticals (VRX), healthy product maker Schiff Nutrition International (WNI) and asset management company GLG Partners (GLG).
Insiders at Valeant Pharmaceuticals sold 2.3 million shares, or $58.9 million worth of stock, at an average price of $26 a share. This looks like another case of insiders selling into strength, with the stock only a point off its 52-week high of $28.23.
What’s interesting here, though, is that insiders are dumping a lot of stock right before Valeant reports its third-quarter earnings on Nov. 4. Do they know something? Only time will if that large selling was a good idea prior to earnings. It’s worth noting that every time the stock has traded up toward $27 to $28 in the past two months, it has quickly sold off back toward $26.
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Corporate insiders at Schiff Nutrition International sold 7.5 million shares, or $48.8 million worth of stock, at an average price of $6.52 a share. This selling was actually a transfer of a stake in the company from Schiff Nutrition’s majority shareholder Weider Health and Fitness to private equity firm TPG. The deal equates to more than a 25% stake for TPG, and along with the stake, the company will get two executives placed on Schiff’s board of directors.
Schiff Nutrition has a great balance sheet, with $43 million in total cash and zero total debt, and a market cap of $222.85 million. This deal shows that private equity wants a big piece of the growing trend in America toward a healthier lifestyle.
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Switching our attention to some companies that had decent insider buying, one company that saw insiders finding value in their stock was MannKind (MNKD), a biopharmaceutical company focused on the discovery, development and commercialization of therapeutic products for diseases such as diabetes and cancer.
The insider buying here was done by MannKind CEO Alfred E. Mann, who bought 700,000 shares, or $5 million worth of stock, at an average price of $7.15 a share. With the stock trading at $6.46 a share as of Wednesday's close, market players who are interested in owning this name can buy it right now, cheaper than the CEO did.
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It’s worth noting that this stock is heavily shorted, with more than 22.90% of the float currently controlled by the bears. If I was short this stock, I wouldn’t be very happy to see the CEO stepping in and buying large chunks it. Investors should definitely keep an eye on this activity to see if more buying hits the wires in the near future.
Another company that saw insider buying was worldwide provider of agriculture products for farmers Monsanto (MON). Insiders at Monsanto bought 18,000 shares, or $1 million worth of stock, at an average price of $56.36. It looks like insiders at Monsanto are starting to find value in their shares, with the stock off by more than 27% year-to-date. The insider who was buying stock in Monsanto was Chairman, President and CEO Hugh Grant.
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I find it interesting that Grant didn’t step in and buy some stock when shares were trading in the mid-$40s earlier this month. He waited until the stock broke back above the 50-day moving average before pulling the trigger.
From a technical standpoint, shares of Monsanto are now bumping up against some resistant at the 200-day moving average of $60.55. There’s also more overhead resistance at around $62 a share, so watch for the stock to take out those levels before you get too comfortable with a long position.
Some more-modest insider buying also showed up in big-name companies such as General Electric (GE), Intel (INTC) and Alcoa (AA). Insiders at Intel bought 20,000 shares, or $384,607 worth of stock, at an average price of $19.23 a share. Insiders at General Electric bought 20,553 shares, or $333,575 worth of stock, at an average price of $16.23, and insiders at Alcoa bought 10,000 shares, or $127,300 worth of stock, at an average price of $12.73. These moves are nice to see, but in the grand scheme of things are just too small of purchases to get me excited.
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To see more stocks with interesting insider activity, including Hersha Hospitality Trust (HT), EMC Corporation (EMC) and GameStop (GME), check out the Top 20 Stocks With Insider Buying & Selling portfolio on Stockpickr.
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At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.
