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5 Stocks With Big Insider Buying - 8154 views
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.
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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, large institutional money managers running big mutual funds and hedge funds 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 some stocks whose insiders have been doing some big buying per SEC filings.
One biotech company that insiders have been buying is Savient Pharmaceuticals (SVNT), a specialty biopharmaceutical company focused on commercializing Krystexxa (pegloticase) in the U.S. and completing the development and seeking regulatory approval outside of the U.S. for Krystexxa , particularly in the European Union. Insiders are clearly finding some value here, since this stock is off by over 58% so far in 2011.
This company has a market cap of $326 million and an enterprise value of $258 million. This company is currently not profitable and has an operating cash flow of -$75 million and a levered free cash flow of -$51.99 million. This is a cash-rich company, with a total cash position on its balance sheet of $240.35 million and total debt of $173.33 million. That nets out to a total of $67.02 million in cash.
The CEO and president just bought 28,000 shares, or $114,451 worth of stock, at $4.09 to $4.10 per share.
From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. That said, the stock has formed a prefect near-term double-bottom chart pattern at around $3.53 to $3.55 a share during the past two months. This double-bottom pattern followed a big drop in the stock from its July high of $8.03 a share.
The way I would play this stock is to be a buyer off the next major breakout. That breakout will trigger once this stock trades above some near-term overhead resistance at $4.61 a share and above its 50-day moving average of $5.15 a share. I would look for a breakout confirmation if you see volume that tracks in close to or above its three-month average volume of 1.78 million shares. It’s worth noting that a number of recent up days have registered volume well above 1.78 million.
This is a heavily shorted stock, with over 32% of the tradable float currently sold short by the bears. It’s worth mentioning that the bears have been increasing their bets from the last reporting period by 3.1%, or by about 676,577 shares. If this stock breaks out soon, then a large short squeeze could take this stock back towards $8 a share in a hurry.
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Urstadt Biddle Properties
Another name with notable insider buying is Urstadt Biddle Properties (UBP), a real estate investment trust engaged in the acquisition, ownership and management of commercial real estate such as neighborhood and community shopping centers in the Northeast U.S. This stock hasn’t done much this year, with shares off by around 8%.
This company has a market cap of $421 million and an enterprise value of $562 million. Urstadt pays a solid dividend of 89 cents per share, which works out to a yield of 5.8%. This is not a cash-rich company, with a total cash position on its balance sheet is $1.81 million and total debt of over $139 million.
The CEO and chairman of the board just bought 57,500 shares, or $888,371 worth of stock, at $15.45 per share. The CEO also bought over $400,000 worth of stock at around $14 a share back in early August.
From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. The stock has also recently run into some stiff overhead resistance at around $15.65 to $15.50 a share after coming off its August low of $12.60 a share.
If you want to buy this stock, I would only get long on a move above both its 50-day moving average of $15.74 and its 200-day moving average of $16.05 on big volume. Look for volume that’s tracking in close to or above 2,785 shares. I would avoid this stock altogether if you see it drop below some big near-term support at $14.70 a share on heavy volume.
A natural gas player whose insiders have snapped up a large amount of stock is Crosstex Energy (XTXI), which is engaged in the gathering, transmission, processing and marketing of natural gas and natural gas liquids through its subsidiaries. What’s interesting here is that insiders are paying up to buy a huge amount of stock, since shares are up over 63% so far in 2011.
This company has a market cap of $684 million and an enterprise value of $1.45 billion. This is far from a cheap stock, with a forward price-to-earnings of 290. Crosstex’s estimated growth rate for this year is 75%, and for next year it’s pegged at 183%. This is not a cash-rich company, with a total cash position on its balance sheet of $7 million and total debt of a whopping $789.88 million.
A beneficial owner just bought about 1.8 million shares, or about $26.4 million worth of stock, at $14.89 per share.
From a technical standpoint, the stock is currently trading above its 50-day and its 200-day moving averages, which is bullish. Crosstex recently made a monster run from its August lows of $8.33 a share to its current price of just over $14.50 a share.
f you want to buy this stock, I would look to buy it once it breaks out above $15.25 to $15.30 a share on big volume. Those levels have marked a double top for now unless the stock can reverse course and get back above that overhead resistance. I would look for a breakout on volume that’s tracking in at close to or above its three-month average action of 984,745 shares. One could also buy this stock off any significant weakness with a stop just below the 50-day moving aveage of $12.13 a share.
In medical equipment and supplies complex, a key insider has done some notable buying in Lincare Holding (LNCR), a provider of oxygen and other respiratory therapy services to patients in the home. This stock is down over 22% so far in 2011.
This company has a market cap of $1.9 billion and an enterprise value of $2.34 billion. The stock trades at a cheap valuation, with a trailing price-to-earnings of 10.9 and a forward price-to-earnings of 9.18. Lincare’s estimated growth rate for this year is 3.7%, and for next year it’s pegged at 16.5%. This is not a cash-rich company; its total cash position is $122.15 million, and its total debt is $532.79 million.
The CEO and chairman of the board just bought 25,000 shares, or $521,500 worth of stock, at $20.86 per share. Two other directors at the company also bought over $700,000 worth of stock at around $20 a share during the past two months.
From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been beaten down big from its July high of $30.21 a share to a recent low of $19.65 a share. Since that huge drop, the stock has started to form a basing pattern between $19.60 and $22.50 a share. This sideways pattern could be signaling a bullish trend change for the stock.
If you’re looking to buy this stock, I would be a buyer once it breaks out above the upper end of the sideways trading pattern at $22.50 and then above its 50-day moving average of $22.93 a share. Look for a move above those levels on solid volume that’s tracking in close to or above its three-month average volume of 1.5 million shares. One could also buy it off weakness with a stop just below that big support at $19.65 a share.
Lincare is one of the top-yielding health services stocks.
In the food processing sector, a key insider has done some notable buying in Snyder's-Lance (LNCE), which manufactures, markets and distributes a variety of snack food products, including pretzels, sandwich crackers, chips, sugar wafers and nuts. Insiders must be seeing value here, with the stock down by around 14% so far in 2011.
This company has a market cap of $1.36 billion and an enterprise value of $1.62 billion. The stock trades at a reasonable valuation, with a forward price-to-earnings ratio of 16.25. Snyder’s estimated growth rate for the next quarter is 8.7%, and for next year it’s pegged at 50%. This is not a cash-rich company; its total cash position on their books is just $11.15 million, and it total debt is over $261 million.
The chairman of the board just bought 23,424 shares, or $477,836 worth of stock, between $20.20 and $20.45 per share. This same director has also been steadily buying large amounts of stock since March.
From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double top at $22.50 a share and has since then dropped back below those key moving averages I mentioned above.
If you’re looking to buy this stock, I would get long off any weakness that takes it under $19 a share. Over the past year, that’s been the best level to get into the stock and play it for a bounce back above $20. I would stop out of this trade if LNCE moves below some big near-term support at $18.30 a share.
Snyder's-Lance is one of the top-yielding food and beverage stocks.
To see more stocks with notable insider buying, including Zogenix (ZGNX), Alpha & Omega Semiconductor (ASOL) and Strategic Hotels & Resorts (BEE), check out the Stocks With Big Insider Buying portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.
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.